Completion of assessment based on notices served to e-mail address of dissolved firm is unsustainable

Clipped from: https://taxguru.in/income-tax/completion-assessment-based-notices-served-e-mail-address-dissolved-firm-unsustainable.html

P.A. Logistics Vs The Additional (Kerala High Court)

Kerala High Court held that completion of the assessment on the basis of best judgment alleging that petitioner had not responded to pre-assessment notice is unsustainable as the notices were served to the e-mail address of the dissolved firm.

Facts- The petitioner is an assessee under the Income Tax Act, 1961. For the assessment year 2017-2018, a notice was issued to the petitioner under Section 148 of the Income Tax Act, followed by notices under Section 142(1) of the Income Tax Act. It appears that these initial notices were issued by the Jurisdictional Assessing Officer and some of these notices were responded to by the petitioner. Following amendments to the Income Tax Act, 1961, with effect from 01-04-2021, the assessment was shifted from the Jurisdictional Assessing Officer to the National Faceless Assessment Center. The National Faceless Assessment Center had issued pre-assessment notices to the petitioner which, according to the petitioner, never came to the notice of the petitioner. The National Faceless Assessment Center therefore completed the assessment on best judgment basis and concluding that the petitioner had not responded to the pre-assessment notices issued by the National Faceless Assessment Center.

Conclusion- The petitioner is not legally entitled to any notice before the proceedings were transferred to the National Faceless Assessment Centre. The National Faceless Assessment Centre has thereafter issued notices to the petitioner in the E-mail address of the dissolved firm. The National Faceless Assessment Centre was clearly aware that the firm had been dissolved and the business had been discontinued on the basis of the replies filed earlier by the petitioner before the Jurisdictional Assessing Officer. An assessment order suggests that this information was available with the National Faceless Assessment Centre, when it proceeded to complete the assessment on the basis of best judgment and on the basis that the petitioner had not responded to the pre-assessment notices.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

Petitioner has approached this Court challenging Ext.P3 order of assessment issued by the National Faceless Assessment Center. The primary contention of the petitioner is that Ext.P3 order has been issued without following the procedure contemplated by law and in violation of principles of natural justice.

2. The petitioner is an assessee under the Income Tax Act, 1961. For the assessment year 2017-2018, a notice was issued to the petitioner under Section 148 of the Income Tax Act, followed by notices under Section 142(1) of the Income Tax Act. It appears that these initial notices were issued by the Jurisdictional Assessing Officer and some of these notices were responded to by the petitioner. Following amendments to the Income Tax Act, 1961, with effect from 01-04-2021, the assessment was shifted from the Jurisdictional Assessing Officer to the National Faceless Assessment Center. The National Faceless Assessment Center had issued pre-assessment notices to the petitioner which, according to the petitioner, never came to the notice of the petitioner. The National Faceless Assessment Center therefore completed the assessment on best judgment basis and concluding that the petitioner had not responded to the pre-assessment notices issued by the National Faceless Assessment Center.

3. Adv. Mohan Pulikkal, the learned counsel appearing for the petitioner, would submit that the petitioner’s firm had been dissolved with effect from 31-03-2021, as is evident from Ext.P2. It is submitted that the petitioner’s firm had availed a loan of Rs.83,00,000/- (Rupees Eighty Three Lakh only) from Hinduja Leyland Finance Ltd., for purchase of five commercial vehicles. It is submitted that the re-assesssment proceedings in respect of the assessment year 2017-2018, have been taken on the premise that there is no proper explanation for the source of funds to purchase these commercial vehicles. It is submitted that the notices issued by the National Faceless Assessment Center, was to the E-mail address of the dissolved firm and therefore the petitioner was not in a position to respond to those notices. It is submitted that since the petitioner has a substantial case to be argued on merits, Ext.P3 assessment order may be set aside and the matter may be remanded for fresh consideration of the National Faceless Assessment Center. It is submitted that since Ext.P3 is issued in violation of principles of natural justice, the availability of any alternative remedy need not deter this Court from exercising jurisdiction under Article 226 of the Constitution of India.

4. Adv. Jose Joseph, the learned Standing Counsel appearing for the respondent department, would vehemently oppose the grant of any relief to the petitioner. Firstly, it is submitted that there is no question of violation of principles of natural justice, in the facts and circumstances of this case. It is submitted that notices were initially issued to the petitioner by the Jurisdictional Assessing Officer and some of these notices had been responded to by the petitioner. It is submitted that subsequently, after the file was transferred to the National Faceless Assessment Center, the National Faceless Assessment Center had issued notices to the E-mail address of the dissolved firm available on the portal. It is submitted that if there was any change in the E-mail address and if the petitioner required notices to be issued to any other E-mail address, it was the duty of the petitioner to have updated the E-mail address on the portal . It is submitted that the contentions of the petitioner can very well be taken up in an appeal against Ext.P3 order of assessment and this Court should not exercise its jurisdiction under Article 226 of the Constitution of India, to interfere with Ext.P3 order.

5. The learned counsel appearing for the petitioner, in reply, submits that though an appeal has been filed against Ext.P3 order, the petitioner is entitled to get relief from this Court in the facts and circumstances of the case.

6. Having heard the learned counsel appearing for the petitioner and the learned Standing Counsel appearing for the respondent department, I am of the view that the petitioner is entitled to succeed. The circumstances which compel me to take such a view are the following:

i. The initial notices issued to the petitioner where by the Jurisdictional Assessing Officer. It is not disputed that some among these notices have been responded to by the petitioner. Thereafter, following amendment carried out to the Income Tax Act, 1961 [with effect from 01-04-2022], the assessment was shifted from the Jurisdictional Assessing Officer to the National Faceless Assessment Centre. The petitioner is not legally entitled to any notice before the proceedings were transferred to the National Faceless Assessment Centre. The National Faceless Assessment Centre has thereafter issued notices to the petitioner in the E-mail address of the dissolved firm. The National Faceless Assessment Centre was clearly aware that the firm had been dissolved and the business had been discontinued on the basis of the replies filed earlier by the petitioner before the Jurisdictional Assessing Officer. A reading of Ext.P3 assessment order suggests that this information was available with the National Faceless Assessment Centre, when it proceeded to complete the assessment on the basis of best judgment and on the basis that the petitioner had not responded to the pre-assessment notices.

ii. In Calcutta Discount Co. Ltd. v. Income Tax Officer, Companies District I, Calcutta and Anr; AIR 1961 SC 372, a Constitution Bench of the Supreme Court held as follows:

“28. In the present case the company contends that the conditions precedent for the assumption of jurisdiction under S.34 were not satisfied and came to the court at the earliest opportunity. There is nothing in its conduct which would justify the refusal of proper relief under Art.226. When the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. In the present case we can find no reason for which relief should be refused”.

The petitioner is therefore entitled to approach this Court under Article 226 of the Constitution of India, notwithstanding the fact that the petitioner has already invoked the Appellate remedy by filing Ext.P6 appeal.

7. Therefore this writ petition is allowed. Ext.P3 is quashed. The matter is remanded to the National Faceless Assessment Centre for completing fresh assessment in accordance with law. The petitioner shall, within a period of two weeks from today, update the E-mail address of the petitioner in the portal of the Income Tax Department. The petitioner will also intimate the Jurisdictional Income Tax Officer, the E-mail address to which the notices to the petitioner have to be sent.

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