Cherian Varkey Construction Company PVT. LTD. vs. The Assessment Unit/Verification Unit/Technical Unit/Review Unit

WP(C)/19036/2023HC KeralaGSTCNR KLHC01041481202302 February 2024Bench: HONOURABLE MR. JUSTICE D. K. SINGH5 pages

For Respondent: JOSE JOSEPH-SC

AI SummaryAllowed

Facts

The petitioner, Cherian Varkey Construction Company Pvt. Ltd., filed its income tax return on December 21, 2021. The case was selected for scrutiny, and a notice under Section 142(1) of the Income Tax Act, 1961, was issued. Subsequently, a show cause notice dated December 5, 2022, was issued, alleging that the petitioner had made payments totaling Rs. 4,48,63,119/- and contract payments of Rs. 18,57,713/- to suppliers who were either non-filers or had filed returns with substantially lower turnover compared to their GSTR-1 returns. The petitioner requested a list of these suppliers, but the assessing authority refused, stating there was no logical reasoning for the petitioner's failure to provide the information. The petitioner contends that without this information, they could not file a proper response to the show cause notice, leading to the finalization of an assessment order (Ext.P7) which, ironically, contained an Excel sheet listing the non-filers.

Held

The Court allowed the writ petition, setting aside the impugned assessment order. The Court reasoned that the assessing authority had failed to provide the petitioner with the relevant data requested, which was crucial for the petitioner to file a proper response to the show cause notice. The Court acknowledged that the assessing authority did not dispute this fact. Consequently, the Court directed that the assessment order itself be treated as a show cause notice for the petitioner. The petitioner was granted a period of two weeks from the date of the order to file their response. Upon receipt of the petitioner's reply, the assessing authority was directed to proceed to pass a fresh assessment order in accordance with the law. The respondent was also directed to open the portal for the petitioner to file their reply. The issue of whether the original assessment order was validly passed was decided in favor of the petitioner.

Key Issues

1. Whether the assessment order dated December 13, 2022, passed by the assessing authority is liable to be set aside due to the non-furnishing of crucial information to the petitioner, thereby preventing a proper response to the show cause notice? Petitioner's Arguments: The petitioner argued that the assessing authority failed to provide the necessary details of the alleged non-filers and suppliers with low turnover, despite the petitioner's specific request. This omission prevented the petitioner from filing a proper and effective response to the show cause notice. The petitioner further submitted that they would treat the assessment order itself as a show cause notice and file a response within two weeks, requesting the assessing authority to pass a fresh order thereafter. The petitioner relied on the principle that a fair opportunity to respond is a fundamental aspect of natural justice. Revenue's Arguments: The learned Senior Standing counsel for the Income Tax Department did not dispute the fact that the petitioner was not provided with the relevant data as mentioned in the assessment order.

Sections Cited

Section 142(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH FRIDAY, THE 2ND DAY OF FEBRUARY 2024 / 13TH MAGHA, 1945 WP(C) NO. 19036 OF 2023 PETITIONER/S: CHERIAN VARKEY CONSTRUCTION COMPANY PVT. LTD., AGED 55 YEARS G-95, PANAMPILLY NAGAR, ERNAKULAM, REPRESENTED BY ITS MANAGING DIRECTOR, SHRI SAJI V. CHERIAN., PIN - 682036 BY ADVS. A.KUMAR P.J.ANILKUMAR G.MINI(1748) P.S.SREE PRASAD RESPONDENT/S: 1 THE ASSESSMENT UNIT/VERIFICATION UNIT/TECHNICAL UNIT/REVIEW UNIT, INCOME TAX DEPARTMENT, NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK,NEW DELHI ., PIN - 110001 2 NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK,NEW DELHI REPRESENTED BY THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (NAFAC),PIN-110001., PIN - 110001 OTHER PRESENT: JOSE JOSEPH-SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 02.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 19036 OF 2023 2 JUDGMENT Dated this the 2nd day of February, 2024 The petitioner, a private limited company, registered under the provisions of the Companies Act is engaged in Civil Constructions. The petitioner filed return of his income on 21.12.2021, declaring a total income of Rs.30,81,66,090/-. The said case was selected for scrutiny and a notice under Section 142(1) of the Income Tax Act, 1961 was issued. The petitioner filed response to the said notice, and thereafter a show cause notice dated 05.12.2022 was issued on the premise that as per insight’s information, the petitioner had made payments to the suppliers who were either non-filers or have filed non business IT returns or reflected a substantially lower turnover in there IT returns as compared to turnover shown in GSTR-1 Return. 2. A sum of Rs.4,48,63,119/- and contract payment of Rs.18,57,713/- said to be have been paid by the petitioner to the persons who did not file their returns of income for the assessment year 2021-2022 was said to be added to the returned income. 3. The petitioner filed his response on 06.12.2022 to the said show cause notice dated 05.12.2022 as per Ext.P4 and requested the assessing authority to furnish the list of non- filers and other assessess, as stated in the notice in respect of an amount of Rs. 4,48,63,119/- and Rs. 18,57,713/-. WP(C) NO. 19036 OF 2023 3 In response to the said request of the petitioner, the assessing authority, by reply dated 13.12.2022 stated as under:- “you are asking for information from Insight portal. There is no logical reasoning from your side for your failure to provide the requisite information. In such situation, this office fails to understand why information from insight portal should be provided to you.” 4. As contended by the petitioner, the assessing authority did not provide the relevant details, the petitioner could not file his proper response to the said show cause notice, and Ext.P7 assessment order got finalised. The assessment order has an excel sheet disclosing the amount paid by the petitioner to the several persons, who are non- filers of the Income Tax Returns. 5. I have heard Adv. A Kumar, the learned counsel for the petitioner and Adv. Jose Joseph, the learned Senior Standing counsel for the Income Tax Department. 6. Learned counsel for the petitioner submits that, if the details would have been furnished to him at the time of request, he could have given proper response and thereafter, the assessment order should have been finalised. The assessing authority did not furnish the details though, as per the assessment order itself the requisite details were available with the assessing authority. This act of the assessing authority prevented the petitioner from filing his proper response to the show cause notice. 7. Learned counsel for the petitioner submits that the petitioner WP(C) NO. 19036 OF 2023 4 will treat the assessment order in Ext.P7 as show cause notice and he will file the response within a period of two weeks from today, and the assessing authority may proceed to pass the fresh assessment order. 8. Adv. Jose Joseph, the learned Senior Standing counsel for the Income Tax Department does not dispute the fact that the petitioner was not provided with the relevant data as mentioned in the

assessment order. In view thereof, the present writ petition is allowed, the impugned assessment order is set aside. The assessment order itself is treated to be a show cause notice to the petitioner for filing his response / reply within a period of two weeks from today. Once the petitioner files his reply within a period of two weeks, the assessing authority shall proceed to pass a fresh order, in accordance with law. The respondent is directed to open the portal for filing the reply by the petitioner, as directed above. The writ petition is disposed of as above. DINESH KUMAR SINGH JUDGE SJ

WP(C) NO. 19036 OF 2023

5 APPENDIX OF WP(C) 19036/2023 PETITIONER EXHIBITS EXHIBIT P1OF THE NOTICE ISSUED U/S 142(1) OF THE INCOME TAX ACT DATED 11.11.2022 EXHIBIT P2OF THE REPLY DATED 18.11.2022 EXHIBIT P3OF THE SHOW CAUSE NOTICE DATED 5.12.2022 EXHIBIT P4OF THE REPLY DATED 6.12.2022 EXHIBIT P5OF THE NOTICE DATED 13.12.2022 EXHIBIT P6OF THE REPLY DATED NIL EXHIBIT P7OF THE ASSESSMENT ORDER DATED 26.12.2022 EXHIBIT P8OF THE PENALTY NOTICE ISSUED U/S 270A DATED 26.12.2022 EXHIBIT P9OF THE PENALTY NOTICE DATED 2.6.2023 EXHIBIT P10 AOF THE SCREEN SHOT OF THE AIS WITH THE EXTRACTS OF ROY YOHANNAN, RAMESH IRON AND STEEL COMPANY AND PUTHIYAPARAMBATH SUBITH EXHIBIT P11 AOF THE LIST INDICATING THE TRANSACTION DETAILS AS PER PETITIONERS BOOKS WHICH IS THE CLIENTS LEDGER, AS PER THE AIS, AND AS PER THE ORDER EXHIBIT P12 AOF THE LIST OF THE PAYMENT DETAILS TO THE SUPPLIERS EXHIBIT P13 AOF THE COMPARISON AS TAKEN FROM THE AIS AND AS PER THE ORDER

Reproduced from the public record of the Kerala High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.