Income Tax: Madras HC Quashes AY 2019-20 Reassessment Over Record Access Dispute; Allows 3 Months to File Reply

In a recent ruling, the Madras High Court has awarded a company a second chance to present its side and produce documents, which it could not do due to internal conflicts in the management Waqf. The court directs the Income Tax Department to reconsider the case fairly and afresh. However, the Court also made it clear that the company must act quickly and cooperate; otherwise, the initial tax demand will not be set aside.

The present writ petition [W.P.(MD) No. 21212 of 2025] is being filed by S. Sugarno (petitioner) under Article 226 of the Constitution of India against the Government of India (respondent) in the Madras High Court before the benches comprising Honourable Mr. Justice C. Saravanan, challenging an Income Tax Assessment Order dated 29.01.2025 passed by the Income Tax Officer, along with a Computation Sheet and a Demand Notice issued under Section 156 of the Income Tax Act, amounting to Rs. 18,527,540 for the Assessment Year 2019-2020. The case was decided on 04.08.2025.

The petitioner is the president of Malick Dhinar Baithulmal, an Islamic charitable trust, i.e., Waqf, based in Nagercoil, Tamil Nadu. Here, in this case, the dispute is within the management of the Waqf. A new committee, including the petitioner, was elected on 20.10.2021 for a term of five years. However, the previous committee members did not cooperate and refused to hand over the financial and other important records. Because of this, the current committee says they were unable to file the income tax return for the financial year 2019-2020. Although the petitioner was served with proper show cause notices before the issuance of the final order, they were not able to respond properly or produce the relevant documents due to the non-cooperation of the previous incumbent of the Waqf, namely, Malick Dhinar Baithulmal, Nagercoil.

The Income Tax Department argued that the petitioner still has a legal remedy. He can file an appeal under Section 246A of the Income Tax Act and seek condonation of delay under Section 249, since he missed the deadline. When the court carefully examined the documents, judges concluded that the petitioner deserves another chance to present their side. The judge accepted that the petitioner is willing to submit a detailed reply along with all supporting documents within three months from the date of receipt of the court order.

In conclusion, the court quashed the assessment order dated 29.01.2025 and sent the case back to the Income Tax Officer for fresh consideration. The quashed order will be treated as an extension to the previous SCN. The petitioner must then submit a detailed reply to the notice along with all relevant documents within a time period of three months from receiving the order. The Income Tax Officer must then pass a fresh order within 3 months after receiving the reply, after properly listening to the side of the petitioner, and also direct the petitioner to fully cooperate with the Income Tax Department. If he fails to submit the reply on time or does not cooperate, the department is free to confirm the earlier demand.