Case Note & Summary
The petitioner, Zydus Infrastructure Private Limited, a company incorporated under the Companies Act, 1956, engaged in development, operation and maintenance of Special Economic Zone, filed its Return of Income for Assessment Year 2012-13 on 24.09.2012. The Assessing Officer issued a Scrutiny Notice on 16.09.2014 on 30 different points. The petitioner made full disclosure with necessary annexures and Audit Report. Subsequently, the Assessing Officer issued a Notice of Demand dated 22.01.2020 for Rs.5,02,30,558/- under Section 156 of the Income-tax Act, 1961 along with a communication dated 23.01.2020. The petitioner challenged these notices by way of a writ petition under Article 226 of the Constitution of India. The main legal issue was whether the demand notice was valid when the Assessing Officer failed to consider the petitioner's reply and did not apply his mind. The petitioner argued that the demand was issued mechanically without considering the detailed reply submitted during scrutiny proceedings. The respondent contended that the demand was justified based on the assessment. The court analyzed the facts and found that the Assessing Officer had not considered the petitioner's reply and had not applied his mind before issuing the demand, which violated principles of natural justice. The court held that the notice of demand under Section 156 and the communication dated 23.01.2020 were unsustainable and quashed them. The court directed the Assessing Officer to pass a fresh order after giving the petitioner an opportunity of hearing and considering the reply. The petition was allowed.
Headnote
A) Constitutional Law - Writ Jurisdiction - Article 226 of the Constitution of India - Challenge to Notice of Demand - The petitioner challenged a demand notice under Section 156 of the Income-tax Act, 1961 on grounds of non-application of mind and violation of natural justice. The court held that the Assessing Officer must consider the assessee's reply before issuing a demand, and failure to do so renders the notice invalid. (Paras 3-9) B) Income Tax - Notice of Demand - Section 156 of the Income-tax Act, 1961 - Validity of Demand - The court examined whether the demand notice was issued without proper application of mind. It found that the Assessing Officer did not consider the petitioner's detailed reply and mechanically issued the demand, violating principles of natural justice. The notice was quashed. (Paras 4-9) C) Income Tax - Reassessment Proceedings - Section 147 of the Income-tax Act, 1961 - Opportunity of Hearing - The court noted that the reassessment proceedings were initiated without providing adequate opportunity to the petitioner. The failure to consider the petitioner's objections before issuing the demand notice was held to be a procedural irregularity. (Paras 4-8)
Issue of Consideration
Whether the Notice of Demand under Section 156 of the Income-tax Act, 1961 and the communication dated 23.01.2020 are valid and sustainable in law when the Assessing Officer failed to consider the petitioner's reply and did not apply his mind before issuing the demand.
Final Decision
The court allowed the petition, quashing the Notice of Demand dated 22.01.2020 under Section 156 of the Income-tax Act, 1961 and the communication dated 23.01.2020. The Assessing Officer was directed to pass a fresh order after giving the petitioner an opportunity of hearing and considering the reply.
Law Points
- Natural justice
- non-application of mind
- Section 156 Income Tax Act
- 1961
- Article 226 Constitution of India
- reassessment proceedings
- opportunity of hearing
