Case Note & Summary
The petitioner, M/s R.R. Infraa Construction, a partnership firm, challenged three orders passed by the Income Tax Department for the Assessment Year 2021-22: (1) an assessment order under Section 143(3) of the Income Tax Act, 1961 dated 29.04.2023; (2) a penalty order under Section 270A dated 31.03.2024; and (3) a penalty order under Section 271AAD(1)(i) dated 31.03.2024. The petitioner is engaged in construction business and filed its return of income for A.Y. 2021-22. The Assessing Officer conducted a scrutiny assessment and made additions based on statements of third parties, including one Mr. S. Sivakumar, without providing copies of those statements to the petitioner or allowing cross-examination. The petitioner contended that the assessment order was passed in violation of principles of natural justice. The court examined the records and found that the Assessing Officer had not supplied the statements or documents relied upon, nor granted an opportunity to cross-examine the deponents. The court held that such procedural lapses vitiate the assessment order. Consequently, the penalty orders under Sections 270A and 271AAD, which were based on the same assessment, also could not be sustained. The court allowed all three writ petitions, quashed the impugned orders, and remanded the matter back to the Assessing Officer for fresh consideration, with a direction to provide all documents and opportunity of cross-examination to the petitioner.
Headnote
A) Income Tax - Assessment under Section 143(3) - Natural Justice - Failure to provide documents and opportunity of cross-examination - The Assessing Officer passed assessment order based on third-party statements without supplying copies or allowing cross-examination - Held that such order violates principles of natural justice and is liable to be set aside (Paras 1-10). B) Income Tax - Penalty under Section 270A - Non-application of mind - Penalty imposed for under-reporting of income without proper show cause or consideration of explanation - Held that penalty order cannot sustain when based on invalid assessment (Paras 11-15). C) Income Tax - Penalty under Section 271AAD - Penalty for false entry in books - Imposed without establishing that entries were false or that petitioner had knowledge - Held that penalty is unsustainable in absence of evidence (Paras 16-20).
Issue of Consideration
Whether the assessment order and penalty orders passed under Sections 143(3), 270A, and 271AAD of the Income Tax Act, 1961 are valid when the Assessing Officer failed to provide documents relied upon and denied opportunity of cross-examination.
Final Decision
All three writ petitions are allowed. The impugned assessment order dated 29.04.2023 and penalty orders dated 31.03.2024 are quashed. The matter is remanded back to the Assessing Officer for fresh consideration, with a direction to provide all documents and opportunity of cross-examination to the petitioner.
Law Points
- Natural justice
- right to cross-examination
- non-application of mind
- reassessment without fresh material
- penalty without proper show cause
