By TIOL News Service

CHENNAI, MAY 02, 2018: THE ISSUE AT HAND BEFORE THE COURT WAS - Whether an assseessee can allege contravention of the principles of natural justice for the first time before the High Court, on grounds that the Show Cause Notice issued to it omitted to mention the exact provision contravened, without having raised such issue before the lower authorities. NO IS THE ANSWER.

The Court held that although the SCN may have been defective, its intent was clear for all to see, and that relevant columns had been marked, particularly where the case against the assessee is that they have concealed particulars of income and furnished inaccurate particulars of income.

Facts of the case

The assessee company, engaged in hire-purchase, lease of equipment & allied activities, filed returns for the relevant AY, claiming depreciation on machinery. On assessment, the AO treated a lease transaction entered into with a certain company, as a finance transaction. The AO also found certain irregularities in the supply of machinery, and so disallowed the depreciation claimed. The AO also levied penalty u/s 271(1)(c). On appeal, the CIT(A) confirmed the findings of the AO, since the assessee admitted to having claimed depreciation on an asset which was not in existence. The penalty was also upheld on grounds that the assessee concealed particulars of its income and furnished inaccurate particulars. The assessee's appeal before the Tribunal were also dismissed.

On hearing the matter, the High Court held that,

++ upon perusing the notices it is seen that the relevant columns have been marked, more particularly, when the case against the assessee is that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee is liable to be rejected on facts. That apart, this issue can never be a question of law in the assessee's case, as it is purely a question of fact. Apart from that, the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice. All violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the AO or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, it can be concluded that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage.

(See 2018-TIOL-813-HC-MAD-IT)