Chhattisgarh Rajya Open School vs Union Of India

Heard.

The present appeal is against the order dated 25/11/2022 passed by the learned Single Judge in WP (T) No.250 of 2022 wherein the order dated 17/09/2022 was under challenge which was passed under Section 143 (3) read with Section 144 B of the Income Tax Act.

Learned counsel for the appellant would submit that initially after submission of return of income, scrutiny was opened and thereafter show-cause notices were issued on 29/08/2022 & 09/09/2022. The appellant filed its reply on 12/09/2022. In the show-cause certain income was proposed to be added. The appellant filed its reply and the total assessment was worked out to Rs. 9,84,42,228/-. It is contended by the appellant that while such assessment was worked out, certain part of the assessment comprised disallowance to confidential expenses. He would further submit that part of that disallowance of confidential expenses was not the part of show-cause, as such the appellant could not respond to it and almost it amounted to assessment without giving any show-cause to the particular subject of disallowance of confidential expenses. For the said assessment it amount to not hearing to the appellant, therefore, the rules of natural justice were defeated. Consequently, the writ petition was maintainable before the learned Single Judge despite the alternative appellate remedy is available. He would further submit that in order to arrest the recovery by way of stay as per the Income Tax Act, the appellant would be required to deposit 20% of the demand. He would further submit that his claim in this petition is confined to disallowance of confidential expenses to the extent of Rs.3,55,17,204/-.

Learned counsel for the respondent opposes the submission advanced by learned counsel for the appellant and would submit that the appellant has an efficacious alternative statutory remedy under Section 246 (A) of the Income Tax Act, therefore, the order passed by the learned Single Judge is well merited as the writ petition directly would not lie before this Court.

After hearing both the parties and going through the order passed by the learned Single Judge, since the issue is only confined to disallowance of confidential expenses to the extent of Rs.3,55,17,204/-, we would like to deliberate on this issue. The perusal of the petition would show that after the show-cause notice was lastly served on 09/09/2022 and when the reply was filed on 12/09/2022, the issue of confidential expenses did not surface, it only surfaced after the assessment was worked out. Perusal of the assessment order (para 3.3) would show that the expenditure incurred in name of confidential expenses was not a part of the show-cause to be explained. It only figured in the final assessment order and expense of Rs.3,55,17,204/- in name of confidential expenses was disallowed. Therefore, we are of the view that the appellant who confined his case to the above extent should get an opportunity to explain the figure of actual confidential expenses, which may subject to scrutiny by assessment and perusal of the paper. Without giving any opportunity of hearing or giving any opportunity to explain, disallowance of such amount may cause prejudice to the appellant. Consequently, the order of the learned Single Judge is modified to the extent that the respondent may serve the show-cause notice to the appellant in accordance with the Income Tax Act, whereby the disallowance of confidential expenses would be a subject issue and the appellant on receipt of the show-cause shall file their reply and may place all the necessary documents which are in their possession. The aforesaid exercise i.e. issuance of show-cause and hearing shall be concluded within the further outer limit of two months from the date of receipt of the copy of this order.

With the aforesaid observation, the writ appeal stands disposed of.