IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, 04TH DAY OF OCTOBER 2019/ 12TH ASWINA, 1941 WP(C).No.1470 OF 2019(G) PETITIONER/S: PARAKKADAVIL MOHAMMED KUNJU ANSARI PROPRIETOR-M/S. SHERWUD TRADERS, PARAKKADAVIL HOUSE, ERUMELI P.O., KOTTAYAM -686509. BY ADVS. SRI.M.P.SHAMEEM AHAMED SRI.CYRIAC TOM RESPONDENT/S: 1 INCOME TAX OFFICER, WARD-1, KOTTAYAM, PUBLIC LIBRARY BUILDING, SHASTRI ROAD, KOTTAYAM-686001. 2 UNION OF INDIA REPRESENTED BY REVENUE SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK NEW DELHI-110001. R1 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX R2 BY ADV. SRI.B.PRAMOD THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04.10.2019, COURT ON SAME DAY DELIVERED FOLLOWING: WP(C).No.1470 OF 2019(G) : 2 : JUDGMENT petitioner, individual and income tax assessee on rolls of Income Tax Officer, Ward-1, Kottayam, was engaged in timber business during financial year 2015-16, corresponding to assessment year 2016-17. petitioner had sold about 13 adjacent agricultural plots to M/s Believers Church, and while filing his return showed sale consideration as agricultural income which was exempted from tax under head of Capital Gains. return submitted by petitioner for assessment year in question was subjected to scrutiny through notice dated 07.07.2017 issued to petitioner under Section 143(2) of Income Tax Act. This was followed by another notice dated 23.4.2018, and later by Ext.P3 notice dated 10.7.2018, where petitioner was asked to furnish information to queries raised in annexure to said notice. While petitioner submitted Ext.P4 reply to said query, by Ext.P5 query dated 12.11.2018, petitioner was asked to produce documents to substantiate his claim in return that amount of Rs.17 crores was exempted from income tax under head Capital Gains as same was purportedly in respect of sale of agricultural land. petitioner submitted Ext.P6 reply to said query, but department thereafter raised fresh query seeking evidence in respect of all sources of income declared in return of income tax for assessment year 2016- WP(C).No.1470 OF 2019(G) : 3 : 17 (Ext.P7 dated 27.11.2018). petitioner responded to said query by Ext.P8 reply dated 6.12.2018. Thereafter, sworn statement was taken from petitioner on 10.12.2018 (Ext.P9) and on 19.12.2018, department through Ext.P10 query, sought for further documents from petitioner to substantiate his claim with regard to sources of income and details of expense incurred during financial year to support his claim in returns filed by him. petitioner states that details sought for in Ext.P10 query were furnished through Ext.P11 reply dated 21.12.2018. Thereafter, inspection was conducted for verifying factual aspects, disclosed by petitioner in his various replies, to substantiate his claim for exemption. Pursuant to inspection, some clarifications was sought for, which petitioner furnished through Ext.P14 communication dated 24.12.2018. Thereafter Ext.P15 notice dated 28.12.2018 was issued to petitioner giving summary of proposals of department for completing assessment in relation to petitioner, and since time limit for completing assessment under Income Tax Act was due to expire, petitioner was asked to submit his explanation, if any, to said proposal within day, making it clear that if no reply was received, assessment would be completed without any further notice. 2. It is not in dispute that petitioner submitted his reply to Ext.P15 notice through Ext.P16 communication of same date. WP(C).No.1470 OF 2019(G) : 4 : Thereafter, by Ext.P17 order, assessment in relation to petitioner for assessment year 2016-17 was completed by finding that petitioner was liable to tax in amount of Rs.5,76,29,515/-. Ext.P18 is notice of demand issued to petitioner pursuant to assessment order. In writ petition, petitioner impugns Ext.P17 order and Ext.P18 demand notice, solely on ground that Ext.P17 order was passed without affording petitioner sufficient time to explain contents of his return to Assessing officer in personal hearing conducted before Assessing Officer. It is contended that, had opportunity been granted to petitioner, he could have explained figures furnished by him through various replies submitted by him, and in as much as said opportunity was denied to him, Ext.P17 assessment order cannot be legally sustained. 3. statement has been filed on behalf of respondent wherein sequence of events leading to passing of assessment order is detailed. It is pointed out that, through series of queries that were raised on petitioner by department, department was only seeking corroborative evidence for substantiating claim of petitioner for exemption of substantial portion of income declared by him. It is pointed out that details sought were essentially for enabling petitioner to establish that exemption claim was in respect of agricultural income which would not fall for assessment under head of WP(C).No.1470 OF 2019(G) : 5 : Capital Gains. It is stand of department that assessment order confirmed demand of income tax on petitioner only because he had not succeeded in substantiating his claim for exemption, and further, had not offered any satisfactory explanation for unaccounted income detected, with any reliable documents and hence there was no prejudice caused to petitioner on account of no hearing having been extended to him prior to passing assessment order. It is, in particular, pointed out that, had petitioner disclosed true and correct information before Assessing Officer, as he was obliged to do in terms of Income Tax Act, there would have been no necessity for department to issue notices to petitioner calling for documents to substantiate his claim for exemption. delay in completing assessment is therefore stated to be attributable solely to inaction on part of petitioner in not furnishing necessary details along with return for assessment year in question. 4. I have heard learned counsel for petitioner and learned Standing Counsel appearing for Income Tax Department. 5. On consideration of facts and circumstances of case as also submissions made across bar, I find that Ext.P17 is order passed under Section 143(3) of Income Tax Act. It is not in dispute before me that statutory notice under Section 143(2) of WP(C).No.1470 OF 2019(G) : 6 : Income Tax Act was served on petitioner on 7.7.2017. It is therefore evident that statutory preconditions to be adhered to before completing assessment against petitioner, had been complied by department in instant case. obligation to disclose, fully and correctly, income that was earned by assessee during assessment period, was on assessee himself, and if department had issued notices to assessee seeking for documents to substantiate his claim for exemption, then that cannot be treated as new proposal by department to fasten liability on petitioner. Accordingly, there was no obligation on department to afford yet another hearing to petitioner before passing assessment order. In instant case, various queries raised by department after perusing reply given by assessee to notice issued under Section 143(2) of Income Tax Act would clearly reveal that department was only seeking for documents that would substantiate claim of petitioner assessee for exemption in respect of substantial portion of income that was declared by him in return. Ultimately, by Ext.P17 assessment order, all that department did, was to deny claim for exemption of petitioner assessee, and while doing so, department was not obliged to grant any hearing to petitioner over and above opportunities that had already been extended to petitioner to respond to specific queries raised by department. In my view, there cannot be mechanical application of principles of natural justice in every case and necessity of affording hearing to WP(C).No.1470 OF 2019(G) : 7 : assessee, in order to comply with rules of natural justice, must be examined on facts of each case. On facts of instant case, I do not find any prejudice having been caused to petitioner through denial of personal hearing since, although petitioner has case that he could have submitted additional documents, he ought to have done so within time granted to him by department and, further, no such documents have been produced in writ petition. Resultantly, I do not find Ext.P17 order to be vitiated by non compliance with rules of natural justice, or by any other jurisdictional error, so as to warrant interference with said order in these proceedings under Art.226 of Constitution of India. writ petition in its challenge against said order and Ext.P18 demand notice fails, and is accordingly dismissed. learned counsel for petitioner would submit that he would require some time to move appellate authority in appeal against Ext.P17 order. Taking note of said submission of learned counsel for petitioner, I direct that if petitioner prefers appeal against Ext.P17 order, before appellate authority, within six weeks from today, then appellate authority shall consider and pass orders in appeal, on merits, after hearing petitioner. In order to enable petitioner to move appellate authority, I direct that recovery steps for recovery of amounts confirmed against petitioner by Ext.P17 assessment order/Ext.P18 demand notice shall be kept in abeyance for above said WP(C).No.1470 OF 2019(G) : 8 : period of six weeks. I also make it clear that nothing in this judgment shall stand in way of petitioner seeking rectification of factual mistakes in Ext.P17 assessment order before assessing authority. Sd/- Sab A.K.JAYASANKARAN NAMBIAR JUDGE WP(C).No.1470 OF 2019(G) : 9 : APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 COPY OF STATEMENT OF INCOME ALONG WITH ACKNOWLEDGMENT OF FILING INCOME TAX RETURN FOR ASSESSMENT YEAR 2016-17. EXHIBIT P2 COPY OF NOTICE DATED 07.07.2017. EXHIBIT P3 COPY OF NOTICE DATED 10.07.2018 ISSUED U/S 142(1) OF INCOME TAX ACT. EXHIBIT P4 COPY OF REPLY DATED 18.07.2018. EXHIBIT P5 COPY OF LETTER DATED 12.11.2018. EXHIBIT P6 COPY OF REPLY DATED 21.11.2018 ALONG WITH E-PROCEEDINGS ACKNOWLEDGMENT. EXHIBIT P7 COPY OF SUMMONSES DATED 27.11.2018. EXHIBIT P8 COPY OF REPLIES DATED 16.12.2018. EXHIBIT P9 COPY OF STATEMENT RECORDED FROM PETITIONER. EXHIBIT P10 COPY OF LETTER DATED 19.12.2018 ISSUED BY 1ST RESPONDENT. EXHIBIT P11 COPY OF REPLY FILED IN RESPONSE TO LETTER DATED 21.12.2018 ALONG WITH E- PROCEEDINGS ACKNOWLEDGMENT. EXHIBIT P12 COPY OF LETTER DATED 20.12.2018. EXHIBIT P13 COPY OF EMAIL DATED 24.12.2018 WITH ATTACHMENTS. EXHIBIT P14 COPY OF REPLY TO LETTER DATED 20.1.2018 UPLOADED ON 26.12.2018. EXHIBIT P15 COPY OF SHOW CAUSE NOTICE DATED WP(C).No.1470 OF 2019(G) : 10 : 28.12.2018. EXHIBIT P16 COPY OF REPLY TO SHOW CAUSE NOTICE DATED NIL. EXHIBIT P17 COPY OF ASSESSMENT ORDER DATED 31.12.2018. EXHIBIT P18 COPY OF DEMAND NOTICE DATED 31.12.2018. Parakkadavil Mohammed Kunju Ansari v. Income-tax Officer, Ward-1, Kottayam / Union of India, New Delhi