Overlooking Assesssee’s Reply Demonstrates Non-Application Of Mind By The AO: Delhi High Court


The Delhi High Court has quashed the draft assessment orders, final assessment orders, and consequential demand on the grounds that the assessing officer inadvertently overlooked the email reply of the assessee, in which the assessee disclosed vital facts pertaining to its case.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the denial of sufficient time to respond was not just an abrogation of jus naturale but also infringed clause B(1) of the Standard Operating Procedure dated November 19, 2020, of the CBDT, according to which normally a response time of 15 days has to be given to the assessee in order to respond to the notice under Section 142 of the Income Tax Act.

The respondent/department submitted that several notices under Section 148 and Section 142(1), as well as a show cause notice before making a best judgment assessment, were issued to the petitioner. However, according to the petitioner/assessee, none of the notices except the notice dated July 12, 2022, issued under Section 142(1) were received by it.

By way of the notice dated July 12, 2022, the Assessing Officer requisitioned certain information and directed the petitioner to upload it on the web portal of the Income Tax Department and also to send the same through email.

The petitioner explained that a brief reply to the notice dated July 12, 2022, was sent, requesting an extension of time till August 5, 2022, for filing a detailed reply, clarifying that none of the earlier notices had been received.

The petitioner explained that as it officially forgot the password, it could not log in to the web portal, and then on July 21, 2022, it approached the e-filing manager. The request for password resetting was rejected on the grounds that a foreign mobile phone number was not acceptable. The petitioner, being a foreign company, should obtain an Indian mobile phone number for the password reset facility. Realising that uploading the reply on the web portal would take time, the petitioner sent its reply dated August 23, 2022, to the Assessing Officer, clarifying that the source of funds in question was the capital contribution from two foreign companies that hold the petitioner company.

Meanwhile, the Assessing Officer had already passed a draft assessment order based on best judgment, which did not acknowledge the brief reply filed on behalf of the petitioner. On the lines of the draft assessment order, the assessing officer passed the assessment order.

The court noted that the assessment orders, the draft assessment orders, and the consequential demand notices are clearly afflicted by two vices. Firstly, the assessing officer inadvertently overlooked the email reply dated July 20, 2022, from the petitioner. Secondly, the AO denied the assessee sufficient time to respond.

Case Title: Aphv India Investco. Private Limited Versus ACIT

Case No.: W.P.(C) 14224/2022 & CM APPL. 43451/2022

Date: 06.09.2023

Counsel For Appellant: Kamal Sawhney

Counsel For Respondent: Ruchir Bhatia

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