AO Cannot Be Found At Fault If Taxpayer Has Failed To Respond To Show Cause Notices Issued U/s 201(1)/201(1A) Of IT Act: Madras HC

While quashing an order under Section 201 of Income Tax Act, 1961 holding Thiruvannamalai District Central Cooperative Bank (Assessee) in default for non-deduction of tax, the Madras High Court directed that the order be treated as corrigendum to the show cause notices which were not responded to by the Assessee.

Accordingly, the High Court remitted the matter back to the Revenue Department to pass a fresh order on merits preferably within a period of three months from the date of receipt of this order.

While directing the Assessee to file reply to show cause notices within 30 days of receipt of this order, the High Court noted that the Assessee has not fully collated the information that was required to be furnished prior to the show cause notices although, the few details submitted earlier by e-mail were also not examined by the Revenue before passing the order under Section 201.

A Single Judge Bench of Justice C. Saravanan observed that “the Assessing Officer cannot be found fault as the petitioner has failed to respond to the Show Cause Notices dated 14.11.2022 issued under Section 201(1)/201(1A) of the IT Act”.

Advocate R. Sivaraman appeared for the Assessee while the Revenue was represented by Advocate Dr. B. Ramaswamy.

As per the brief facts, the Assessee was subjected to proceedings under Section 201, during which the Assessee furnished details of persons who submitted Form 15G and Form 15H and confirmed that no tax was deducted as none of these depositors received interest over and above Rs.2.5 Lacs and in the case of senior citizens above Rs.3 Lacs. However, Assessee did not attend the hearings and therefore, Revenue passed order under Section 201 for AY 2016-17 to 2020-21 holding the Assessee in default.

After considering the submission, the Bench noted that the Assessee appears to have furnished few details prior to the issuance of the show cause notices through e-mail which were not considered by the Revenue.

However, the Bench remarked that at the same time, the Revenue cannot be found at fault as the Assessee also failed to respond to the show cause notices under Section 201(1)/(1A).

The High Court therefore found that the Assessee was to not only respond but also appear for a personal hearing.

Accordingly, the High Court sets aside the matter to the Revenue for fresh consideration and directed Assessee to cooperate and no further adjournment be entertained once the date is fixed for a personal hearing.

Cause Title: Thiruvannamalai District Central Cooperative Bank Limited v. ITO

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