Income Tax: Madras HC Quashes Faceless Assessment for Petitioner’s lack of Awareness

The High Court has given relief to an agriculturist (petitioner) by cancelling a tax order issued against him regarding unexplained bank transactions. The petitioner, P.Sakthivel, received a show cause notice on 30.01.2024 from the Income Tax Department, saying that some taxable income was not assessed. The department asked him to share information about the money he deposited into his bank accounts and gave him 10 days to send a reply.

The petitioner did not respond to the notice. So, the tax officer concluded that the petitioner had financial transactions of Rs 51,10,960 during the Financial Year 2019-20. Therefore, the National Faceless Assessment Centre (NaFAC) issued several notices asking for documents about these deposits. A notice was also sent by speed post to the petitioner and handed to his auditor. However, the petitioner still did not reply. Because of this, the NaFAC passed the final order on 04.12.2024. Therefore, the petitioner appealed in the Madras High Court to quash the order.

The petitioner submitted that the petitioner was unaware of the notices, as these were issued to the mail ID of the auditor assistant of the petitioner.

The court observed that the NaFAC and the Income Tax officers gave several opportunities to the petitioner to support their case. The Petitioner did not know about the notices, as these were issued to the Petitioner’s auditor. The court added that it is the responsibility of the petitioner to reach out to their auditor periodically and monitor the notices. This was the fault of the petitioner. However, the High Court gave him another chance and cancelled the order, subject to the payment as agreed by the petitioner. The court gave the following directions:

• The order is set aside and is remanded to the National Faceless Assessment Centre, only if the petitioner makes a payment of Rs 10,000 to the credit of Principal Government of Naturopathy Medical College and Hospital, within three weeks.
• The petitioner must request to open the portal for submitting his reply within two weeks.
• The Income Tax Department must keep the portal open to allow the petitioner to file a reply.
• The Income Tax Department must issue a 14-day notice after considering the reply of the petitioner. It must schedule a date for a personal hearing, after which the department is directed to pass a fresh order.