Facts of the Case

The petitioner, M/s BT India Private Ltd., filed writ petitions challenging orders dated 26.03.2020 passed by the Income Tax Officer for Assessment Years 2012–13 and 2013–14.

The impugned orders:

  • Declared the petitioner as an assessee in default under Section 201
  • Issued demand notices under Section 156
  • Initiated penalty proceedings under Section 271C

The petitioner argued that:

  • Show cause notices were issued on 17.03.2020 requiring reply by 20.03.2020
  • Due to the nationwide COVID-19 lockdown, employees were working remotely without access to records
  • A request for adjournment of three weeks was made on 19.03.2020

Despite this:

  • A second notice dated 23.03.2020 was issued requiring compliance within one day
  • Final orders were passed on 26.03.2020 without granting adequate opportunity

Issues Involved

  1. Whether passing assessment orders without granting reasonable opportunity violates principles of natural justice.
  2. Whether actions of the tax authority during the COVID-19 lockdown period were justified.
  3. Whether penalty proceedings initiated without proper hearing are sustainable in law.

Petitioner’s Arguments

  • The respondent acted with undue haste in passing orders within an extremely short time.
  • The lockdown made it impossible to access documents and prepare a proper reply.
  • Denial of adjournment violated principles of natural justice.
  • The assessment and penalty proceedings were arbitrary and unsustainable.

Respondent’s Arguments

  • The Income Tax Department initially proceeded with statutory timelines.
  • However, during the hearing, the respondent conceded that:
    • The impugned orders would be withdrawn
    • Fresh opportunity would be granted to the petitioner to respond to show cause notices

Court’s Findings / Order

The Delhi High Court observed:

  • The conduct of the respondent showed procedural inconsistency, especially when:
    • Adjournment requests were rejected
    • Yet the order claimed to have considered submissions of the petitioner
  • The Court accepted the statement of the respondent that:
    • Impugned orders dated 26.03.2020 would be withdrawn
    • Fresh opportunity would be granted to the petitioner

Final Directions

  • Petitioner granted 2 weeks after lifting of lockdown to respond
  • Department allowed to proceed in accordance with law after receiving reply
  • All petitions disposed of accordingly

Important Clarification by Court

  • The judgment is based on peculiar facts and circumstances of COVID-19 lockdown
  • It shall not be treated as a precedent in other cases

Sections Involved

  • Section 201 of the Income Tax Act, 1961
  • Section 201(1) & 201(1A)
  • Section 156 (Demand Notice)
  • Section 271C (Penalty Proceedings)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:1805-DB/HKO20042020CW29812020_170245.pdf

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