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Issues involved: The judgment involves issues related to the imposition of penalty on assessees without affording them a reasonable opportunity of being heard and the validity of service of notices u/s 140A(3) of the Income Tax Act, 1961.
Imposition of Penalty without Opportunity of Being Heard: The assessees, R.L. Narang and M.L. Narang, were penalized under s. 140A(3) of the Act without being given a fair chance to present their case. The Income Tax Officer (ITO) issued show-cause notices followed by reminders, but the assessees claimed they did not receive them. The Appellate Authority accepted their contention as the identity of the persons who received the notices was unclear. The Tribunal, however, considered the service as valid based on lack of affidavits from the assessees denying receipt. The High Court held that proper opportunity of being heard was not provided, ruling in favor of the assessees. Validity of Service of Notices: The judgment examined the provisions of s. 282 of the Act and s. 27 of the General Clauses Act, 1897, regarding the service of notices. It was observed that service through a process server lacked proper documentation to confirm delivery to the assessees or their representatives. Additionally, reminders sent under certificate of posting did not meet the requirement of being sent by registered post as per s. 27. The absence of affidavits from the assessees was not deemed crucial as their statement was accepted earlier. Consequently, the High Court concluded that the assessees were not accorded the necessary hearing as mandated by law. This judgment highlights the importance of ensuring assessees are given a fair opportunity to be heard before penalties are imposed and emphasizes the significance of following proper procedures for the service of legal notices to maintain transparency and uphold the principles of natural justice.
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