M/S. Rr Infraa Construction vs. Deputy Commissioner Of Income Tax

Held

The Court held that the impugned Assessment Order dated April 29, 2023, passed under Section 143(3) of the IT Act, was liable to be quashed due to a clear violation of the principles of natural justice. The Court noted that the final show cause notice and its crucial annexure were provided with only two days for the petitioner to respond before the scheduled personal hearing, which was insufficient. Furthermore, the Court observed that the directions issued by the 2nd respondent on March 22, 2023, had not been fully complied with in the impugned order. Consequently, the Penalty Orders dated March 31, 2024, passed under Sections 270A and 271AAD(1)(i) of the IT Act, were also quashed as they were consequential to the assessment order. The Court reasoned that to balance the interests of both parties, the case should be remitted back to the Assessing Officer for a fresh assessment on merits. The Court clarified that the petitioner would be entitled to cross-examine only those third-party contractors/suppliers whose statements were relied upon by the Department. The petitioner's request for cross-examination of their own employees was not countenanced, as their statements were considered admissions.

Facts

The petitioner, M/s. R.R.Infraa Construction, filed writ petitions challenging an Assessment Order dated April 29, 2023, under Section 143(3) of the Income Tax Act, 1961, and Penalty Orders dated March 31, 2024, under Sections 270A and 271AAD(1)(i) of the Act, all for Assessment Year 2021-2022. The assessment stemmed from a search conducted under Section 132 of the IT Act, which revealed alleged bogus purchases of sand and gravel from unregistered dealers (Rs. 58,70,58,032) and bogus sub-contractor expenses (Rs. 80,02,09,950). The petitioner had responded to show cause notices and filed an application under Section 144A. Directions were issued by the Additional Commissioner on March 22, 2023, for further inquiry. The petitioner contended that the final show cause notice and annexures were provided with insufficient time for response, leading to a hurried assessment order in violation of natural justice.

Key Issues

1. Whether the impugned Assessment Order dated 29.04.2023 passed under Section 143(3) of the Income Tax Act, 1961, for AY 2021-2022 is liable to be quashed on the grounds of violation of principles of natural justice, specifically due to insufficient time provided to respond to the final show cause notice and its annexures. (Question of law and fact) 2. Whether the Penalty Orders dated 31.03.2024 passed under Sections 270A and 271AAD(1)(i) of the Income Tax Act, 1961, are liable to be quashed as consequential to the vitiated assessment order. (Question of law) Petitioner's Arguments: The petitioner argued that the assessment order was passed in a hurried manner to meet the limitation period, violating principles of natural justice. They contended that Annexure I to the show cause notice dated April 22, 2023, was provided only on April 24, 2023, leaving just two days for response before the personal hearing on April 26, 2023. The petitioner also argued that the directions issued by the 2nd respondent on March 22, 2023, were not fully complied with. The petitioner sought cross-examination of third-party suppliers and sub-contractors. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue or state.