2023 (4) TMI 1293 - HC - Income Tax

Maintainability of writ petition against reassessment orders - denial of natural justice - opportunity of cross-examination/cross-verify the evidences not given - fundamental principles laid down for reopening an assessment by incorporating Section 148A ignored - HELD THAT - On going through the reassessment order, we find that the assessing officer was fully aware of the writ petition, which was pending before the Court and yet to be taken up for hearing and the assessing officer would observe that there is no order passed by this Court restraining him or directing him to keep abeyance from the proceeding and by referring to Section 153 of the Act the assessment has been completed. Various dates have been stated in the preceding paragraphs to show how the assessee has been dealt with by the assessing officer in the matter - we are confined to the aspect that there has been violation of principles of natural justice. The manner in which the reassessment proceeding has been taken through by the assessing officer is thoroughly flawed. The fundamental error committed by the AO in not providing the third party information, which was the basis for issuance of the show cause notice apart from making available those third parties for cross-examination by the assessee when statements recorded by them have been relied upon for issuance of the show cause notice, more particularly, in spite of specific request made by the assessee in this regard. That apart, after passing the order under Section 148 of the Act the assessing officer could not have stated that if the assessee wishes to cross-verify/cross-examine the evidences they may do so after taking prior appointment from him. In fact, such opportunity should have been provided prior to passing of the order u/s 148A of the Act. Thus, we are fully convinced that the procedure adopted by the assessing officer is wholly incorrect and there has been serious violation of principles of natural justice committed by the assessing officer in the entire process - order passed u/s 148A(d) and the consequential reassessment order have to be necessarily quashed and the matter should be restored to the position of show cause notice issued u/s 148A(b) with consequential directions. Assessee appeal allowed.

Summary

Issues involved:
The appeal challenges the order dismissing the writ petition regarding a reassessment under Section 147 of the Income Tax Act, 1961, based on an order under Section 148A(d) of the Act.

Analysis:
The Court examined whether the appellant was given a reasonable opportunity of hearing during the reassessment proceeding. The process began with a show cause notice under Section 148A(b) of the Act, containing various allegations and extracted documents. The appellant raised concerns that the information did not pertain to them, and they were not provided with incriminating documents or the opportunity to cross-examine certain individuals. Despite the appellant's requests, the assessing officer proceeded to pass an order under Section 148A(d) without addressing these issues adequately. The Court noted inconsistencies in the assessing officer's actions and emphasized the importance of following principles of natural justice.

Violation of Natural Justice:
The Court found serious violations of natural justice in the reassessment process. The assessing officer failed to provide essential information to the appellant, did not allow cross-examination of relevant individuals, and did not follow proper procedures before passing the reassessment order under Section 148A(d) of the Act. As a result, the Court quashed the order and directed the matter to be restored to the stage of the show cause notice under Section 148A(b) for proper consideration.

Remedial Action:
The Court allowed the appeal, set aside the previous order, and quashed the reassessment order under Section 147 of the Act. The assessing officer was instructed to provide the requested documents, allow cross-examination of relevant individuals, and proceed with the reassessment in accordance with the law and principles of natural justice. The Court also permitted a personal hearing for the authorized representative of the appellant, with a directive not to raise the question of limitation during the fresh reassessment proceeding.