Income Tax Assessee Who Missed Chance To Request Personal Hearing Cannot Claim That It Was Denied: Madras HC
The Madras High Court ruled that if a taxpayer (assessee) does not seize the opportunity to request a personal hearing from the tax department, they cannot later claim that they were denied this right.
In this instance, the assessee received a show cause notice on March 31, 2022, regarding the reopening of their assessment for the financial year 2018-19. However, the assessee inadvertently failed to respond to this initial notice. A second show cause notice was issued on March 6, 2023, to which the assessee did reply on March 8, 2023. Despite this, the assessment order was issued on March 17, 2023, without providing a personal hearing.
A Bench of Justice Krishnan Ramasamy held, “though the respondent has given liberty to the petitioner to request for personal hearing, the petitioner failed to avail such an option. Therefore, the question of violation of natural justice will not arise.”
Advocate R.Sivaraman appeared for the Petitioner and Senior Standing Counsel B.Ramaswamy appeared for the respondents.
The assessee challenged the assessment order, arguing that they had disclosed an income of ₹91,80,856 in their tax return, although it was filed late in response to the second notice under Section 144b. The department, however, rejected the assessee's explanation, treating the entire amount as income without considering their response dated March 8, 2023.
The department argued that since two show cause notices were issued and the assessee did not respond to the first one, they were justified in not granting a personal hearing.
The case involved the interpretation of Section 148A(b) of the Income Tax Act, 1961, which mandates that the assessing officer issue a notice to the taxpayer if there is information indicating that income has escaped assessment. Additionally, Section 144b outlines the procedure for electronic assessments, which typically do not involve direct interaction between the taxpayer and tax authorities.
The Court noted that after considering the assessee’s reply to the second notice, the assessing officer determined to categorize the full amount reported in the income tax return as the assessee's income, rather than accepting the assessee's calculation of 28% profit based on Section 44A.
Ultimately, the Court acknowledged that although the department had provided the opportunity for a personal hearing, the assessee did not take it, leading to the conclusion that there was no breach of natural justice. Consequently, the Court dismissed the petition, affirming the validity of the assessment order issued by the tax department.
Cause Title: M.S.Mohamed Siddique & Co. v. The Assessment Unit/Verification unit/ Technical Unit/Review Unit Income Tax Department & Anr.