Assessing Officer's Curtailment of Statutory Reply Period and Ignoring Assessee's Response Led to Prejudice; Fresh Order Directed
In a significant judgment delivered on September 8, 2026, the Delhi High Court (Division Bench comprising Justices Dinesh Mehta and Rajneesh Kumar Gupta) quashed an order passed by the Income Tax Department against J J Foods Private Limited, holding that the Assessing Officer (AO) had violated principles of natural justice by curtailing the statutory period for filing a reply and failing to consider the petitioner's response before passing an order under Section 148A(d) of the Income Tax Act, 1961.
The dispute arose when the AO issued a notice under Section 148A(b) of the Income Tax Act on February 22, 2024, requiring J J Foods to file a reply by March 3, 2024. The petitioner sought an adjournment on the scheduled hearing date, which was granted until March 8, 2024. However, on March 8, despite the petitioner's request for a further two-week extension, the AO limited the time to file the reply to March 10, 2024. Due to the petitioner's accountant being out of station, the reply could not be filed by this curtailed deadline, but was eventually submitted on March 15, 2024.
Disregarding the petitioner's reply, the AO proceeded to pass an order under Section 148A(d) on March 18, 2024. The petitioner challenged this order before the Delhi High Court, contending that the AO's act of truncating the reply period from the statutory 30 days to just 15 days prejudiced its rights and that the subsequent non-consideration of its reply amounted to a breach of natural justice.
The respondents argued that ample opportunity had already been granted and that the petitioner's failure to adhere to the deadline justified ignoring the belated reply. They further emphasized the importance of adhering to statutory timelines.
After hearing both sides, the Court observed that the statutory period prescribed under Section 148A(b) for filing replies is 30 days. Curtailing this to effectively 15 days without sufficient justification had seriously prejudiced the petitioner. The Court also noted that the AO still had time to consider the reply filed on March 15 before passing the order on March 18, but chose to disregard it. This procedural lapse was held to be a violation of the principles of natural justice.
Consequently, the Court set aside both the order dated March 18, 2024, and the notice under Section 148 of the Income Tax Act issued on the same date. The AO was directed to pass a fresh order after duly considering the petitioner's reply dated March 15, 2024, without being influenced by the earlier impugned order. The Court clarified that it had not expressed any opinion on the merits of the petitioner's case or the jurisdictional aspects of the matter.
This judgment underscores the importance of adherence to statutory timelines and the fundamental requirement that authorities must consider submissions made by taxpayers before passing adverse orders, ensuring fairness and justice in tax proceedings.
Bottom Line:
Income Tax - Violation of principles of natural justice - Assessing Officer curtailing the statutory period of 30 days to file reply under Section 148A(b) of the Income Tax Act, 1961 to a shorter period prejudiced the petitioner's rights. Failure to consider the reply submitted within the statutory timeline further led to irregularity in the process.
Statutory provision(s):
Income Tax Act, 1961 Sections 148, 148A(b), 148A(d)
