Assessees must respond to tax summons, show cause notices: SC
What's the story
The Supreme Court of India has ruled that an 'assessee' is required to respond to a summons and show cause notice issued by the central or state tax authorities. The term 'assessee' under the Income Tax Act of 1961 refers to any person or entity that is legally liable for paying taxes or other dues under the Act.
Legal obligation
Mere issuance of summons doesn't mean proceedings have begun
A bench of Justices JB Pardiwala and R Mahadevan emphasized that mere issuance of a summons doesn't mean that proceedings have begun. They said, "Where a summons or a show cause notice is issued by either the Central or the State tax authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response."
Information sharing
Bench highlights need to inform other authority in overlapping probes
The bench further stressed that if an assessee knows that the matter being investigated is already under inquiry by another authority, they must immediately inform the latter. This is to avoid duplication of proceedings and ensure optimal use of departmental resources. "If the claim of the taxable person regarding the overlap of inquiries is found untenable," they added, "an intimation to this effect shall be immediately conveyed in writing to the taxable person."
Inquiry rights
Inquiries can continue until overlap is confirmed
The apex court clarified that tax authorities can continue their inquiry or investigation until it is confirmed that both are probing the same liability. Any show cause notice issued for a liability already covered by an existing one will be quashed. However, if one authority finds its matter under probe by another, both must decide which will proceed with the inquiry and share all relevant information accordingly.