Facts of the Case

The petitioner, Mohit Agarwal, filed a writ petition challenging the assessment order dated 21.03.2023, along with demand notice issued under Section 156 of the Income Tax Act, 1961 and consequential penalty notices.

The case pertains to Assessment Year (AY) 2018-19, where the petitioner was accused of being a beneficiary of accommodation entries linked to alleged bogus purchases amounting to ₹35,12,100 from M/s Riddhi Siddhi Polymer.

A show cause notice dated 05.03.2023 was issued, requiring response within a short timeframe. The petitioner sought a personal hearing and attempted to file replies; however, due to technical glitches on the portal, submissions could not be uploaded successfully.

Subsequently, another notice dated 15.03.2023 was issued, again requiring response within a limited period.

Issues Involved

  1. Whether the assessment order passed without granting adequate opportunity of hearing violates the principles of natural justice.
  2. Whether failure to provide the minimum statutory response time as per SOP invalidates the assessment proceedings.
  3. Whether denial of personal hearing despite request vitiates the assessment order.

Petitioner’s Arguments

  • The petitioner contended that the assessment proceedings were conducted in violation of principles of natural justice.
  • It was argued that:
    • Adequate time was not provided to respond to show cause notices.
    • Requests for personal hearing were ignored.
    • Attempts to file replies failed due to technical glitches, which were duly communicated via email.
  • Therefore, the assessment order and consequential notices were liable to be quashed.

Respondent’s Arguments

  • The Revenue argued that:
    • The petitioner was granted two opportunities to respond.
    • There was sufficient compliance with natural justice.
    • The petitioner allegedly attempted to file responses after the prescribed deadlines.

Court’s Findings

The Delhi High Court made the following key observations:

  • As per Clause N.1.3 of the SOP dated 03.08.2022, the Assessing Officer is required to grant minimum 7 days to the assessee to respond.
  • In the present case:
    • First notice allowed only 6 days
    • Second notice allowed 9 days, but circumstances still indicated procedural lapse
  • The Court held that:
    • There was a clear infraction of SOP
    • There was a breach of principles of natural justice, especially considering the request for personal hearing

Court Order / Final Decision

  • The writ petition was allowed.
  • The assessment order, demand notice under Section 156, and penalty notices were set aside.
  • The Assessing Officer (AO) was granted liberty to conduct de novo assessment proceedings in accordance with law.
  • Directions issued:
    • Personal hearing must be granted to the petitioner
    • Opportunity to file reply must be provided
    • A speaking order must be passed thereafter

Important Clarification

  • The Court emphasized that procedural safeguards under SOP are mandatory, not directory.
  • Even where multiple opportunities are claimed, inadequate time and denial of hearing will render proceedings invalid.
  • Technical glitches affecting compliance must be fairly considered by tax authorities.

 Sections Involved

  • Section 156 – Demand Notice under Income Tax Act, 1961
  • Principles of Natural Justice (Audi Alteram Partem)
  • SOP dated 03.08.2022 (Clause N.1.3 – Minimum response time)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/59026042023CW53242023_123305.pdf

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