Facts of the Case

The petitioner, Pratyaksh Apparels Pvt Ltd, challenged multiple assessment orders passed for different Assessment Years (AYs 2013–14 to 2019–20). These assessment orders were all dated 28.03.2023 and were issued under Section 153C read with Section 144 of the Income Tax Act, 1961.

The Assessing Officer (AO) initially issued notices dated 14.03.2023 under Section 153C, granting 30 days to file returns. However, shortly thereafter, further notices dated 20.03.2023 under Section 142(1) were issued requiring submission of documents within just two days.

Despite the petitioner requesting reasonable time (30 days), the AO proceeded to pass assessment orders without granting adequate opportunity.

Issues Involved

  1. Whether passing assessment orders within an unreasonably short time violates the principles of natural justice.
  2. Whether the Assessing Officer acted arbitrarily in curtailing the response period despite granting 30 days initially.
  3. Validity of assessment orders passed under Sections 153C read with 144 and consequential demand notices under Section 156.

Petitioner’s Arguments

  • The petitioner contended that the two-day time limit for submission of documents was arbitrary and unreasonable.
  • It was argued that this violated principles of natural justice, as adequate opportunity to respond was not provided.
  • The petitioner emphasized that the earlier notice itself granted 30 days, creating a legitimate expectation of sufficient time.
  • Passing orders without considering requests for extension amounted to denial of fair hearing.

 

Respondent’s Arguments

  • The Revenue argued the case based on available records and justified the assessment proceedings.
  • It contended that the proceedings were conducted within statutory framework and timelines.
  • The respondent did not insist on filing counter affidavits and proceeded on legal submissions.

Court’s Findings / Order

  • The Assessing Officer placed the petitioner under an “extremely tight leash” by expecting compliance within two days for multiple assessment years.
  • Such a timeline was impractical and unreasonable.
  • The Court found a clear violation of principles of natural justice.

Order:

  • The impugned assessment orders dated 28.03.2023 were set aside.
  • Consequently, demand notices issued under Section 156 were also quashed.
  • The matter was remanded back to the Assessing Officer for fresh consideration.

Important Clarifications by the Court

  • The notice issued under Section 142(1) dated 20.03.2023 was not quashed.
  • The petitioner was directed to respond within four weeks.
  • The Assessing Officer must:
    • Provide all relevant material in possession.
    • Grant a personal hearing before proceeding further.

Sections Involved

  • Section 153C – Assessment of income of any other person
  • Section 142(1) – Inquiry before assessment
  • Section 144 – Best judgment assessment
  • Section 156 – Notice of demand
  • Principles of Natural Justice (Audi Alteram Partem)

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS19052023CW68182023_182439.pdf

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