The Madras High Court delivered a ruling stating that a taxpayer (assessee) who fails to request a personal hearing from the tax authorities cannot later assert that they were denied this right. In the case at hand, the assessee received a show cause notice on March 31, 2022, regarding the reopening of their assessment for the fiscal year 2018-19.
Unfortunately, the assessee did not respond to this initial notice. A subsequent show cause notice was issued on March 6, 2023, to which the assessee responded on March 8, 2023. However, an assessment order was issued on March 17, 2023, without a personal hearing being granted. Justice Krishnan Ramasamy, leading the Bench, noted, “Although the respondent provided the petitioner with the option to request a personal hearing, the petitioner did not take this opportunity. Thus, the issue of a breach of natural justice does not arise.”
Advocate R. Sivaraman represented the Petitioner, while Senior Standing Counsel B. Ramaswamy represented the respondents.
The assessee contested the assessment order, asserting that they had reported an income of ₹91,80,856 in their tax return, albeit submitted late in response to the second notice under Section 144b. Nevertheless, the department rejected the assessee’s justification, classifying the entire amount as income without considering their reply dated March 8, 2023.
The department contended that, having issued two show cause notices and the assessee failing to respond to the first, they were justified in denying a personal hearing. This case centered on the interpretation of Section 148A(b) of the Income Tax Act, 1961, which mandates that the assessing officer notify the taxpayer if there is information indicating that income has escaped assessment. Additionally, Section 144b outlines the protocol for electronic assessments, which typically exclude direct engagements between taxpayers and tax authorities.
The Court noted that after reviewing the assessee’s reply to the second notice, the assessing officer opted to classify the full amount reported in the income tax return as the assessee’s income, rejecting the assessee’s calculation of a 28% profit based on Section 44A.
In conclusion, the Court recognized that while the department did provide the possibility of a personal hearing, the assessee chose not to pursue it, resulting in the absence of any breach of natural justice. As a result, the Court dismissed the petition, upholding the legitimacy 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.