2023 (3) TMI 153 - HC - Income Tax

Penalty u/s 271(1)(c) - violation of principles of natural justice - Shorter period notice given - less than 24 hours given to the petitioner to appear - whether short notice is no notice ? - HELD THAT - We notice that there has been a serious flaw in affording the opportunity of hearing to the parties, which has resulted into imposition of huge amount of penalty on 28.11.2022. Notice u/s 274 read with section 271(1) (c) of the Act had been issued and the petitioner was asked to appear in person or through a duly authorised representative at 11 00 a.m. on 29.11.2022. This show cause notice as to why the order imposing penalty be not made under section 271(1)(c) of the Act gives less than 24 hours to the petitioner, whereby it had asked the petitioner to appear in person or through a duly authorised representative. This shorter period of less than 24 hours can be termed as a pure and simple breach of principles of natural justice. It appears that on 28.11.2022, request was made for adjournment and the same is also reflected from the portal of the Tribunal and that such a request had been made to adjourn the hearing by few days. Without paying any heed to the same, when the order impugned has been passed, the Court requires to interfere. Resultantly, the petition is allowed. The impugned order of penalty dated 30.11.2022 is quashed and set aside.

Summary

Issues:
Challenge to penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2010-11 due to lack of opportunity of being heard.

Analysis:

1. Violation of Principles of Natural Justice:
The petitioner filed a petition under Article 226 of the Constitution of India seeking to set aside the penalty order under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2010-11. The petitioner argued that there was a serious flaw in affording the opportunity of hearing, leading to the imposition of a substantial penalty. The show cause notice issued under section 274 read with section 271(1)(c) of the Act provided less than 24 hours for the petitioner to respond, which was deemed a breach of natural justice. Despite a request for adjournment due to practical difficulties, the penalty order was passed without considering the petitioner's plea, prompting the Court to intervene.

2. Lack of Adequate Opportunity for Hearing:
The Court noted that the short notice given to the petitioner to appear and respond within less than 24 hours was a clear violation of the principles of natural justice. The petitioner had requested an adjournment to prepare adequately and present their case, but the Assessing Officer proceeded with the penalty order without considering this request. The Court found this lack of adequate opportunity for a hearing to be a significant procedural irregularity, warranting the quashing of the penalty order.

3. Court's Decision and Relief Granted:
After hearing arguments from both parties, the Court allowed the petition and set aside the penalty order dated 30.11.2022. The Court directed that an opportunity of hearing should be provided from the stage where it was left off, ensuring that the petitioner receives a fair chance to present their case. The Court emphasized the importance of adhering to principles of natural justice and ordered that the proceedings be completed within eight weeks from the date of the order.

In conclusion, the High Court of Gujarat found in favor of the petitioner, highlighting the significance of providing a reasonable opportunity for a hearing and upholding principles of natural justice in penalty proceedings under the Income Tax Act, 1961.