2024 (2) TMI 1528 - HC - Income Tax

Validity of order passed by ITAT without granting sufficient opportunity to the assessee - denial of natural justice - HELD THAT - Tribunal by recording that no representative has appeared on behalf of the assessee and also on the previous occasions proceeded to decide the matter on merits. The nature of disputes involved for adjudication of the Tribunal are on factual aspects. The Tribunal being final fact finding authority was expected to grant sufficient opportunity to the assessee to submit his case. Tribunal by proceeding to decide the appeal on merits without granting sufficient opportunity to the assessee it would prejudice the assessee s interest. The further appeal under Section 260 A of the Act before this Court would be on substantial questions of law. In the circumstances we are of the view that the order of the Tribunal is not sustainable and the same needs to be set aside on the ground of violation of principles of natural justice. Appeal is allowed. The appeal is remitted to Tribunal for fresh consideration after granting opportunity of hearing to the assessee/assessee representative and the revenue

Summary

The Karnataka High Court considered an appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal. The core legal questions considered were:1. Whether the Income Tax Tribunal erred in interpreting and applying Section 40(A)(3) without considering Section 40.A?2. Whether the Tribunal erred in treating Rule 6DD of the Income Tax Rules as an independent provision without applying the conditions of Section 40(A)(3)?The appellant, engaged in the transport contract business, filed a return of income which was scrutinized by the assessing officer. The Commissioner of Income Tax Appeals and the Income Tax Appellate Tribunal both ruled against the appellant. The Tribunal dismissed the appeal due to the absence of the assessee or their representative during the proceedings.The appellant argued that they were not notified of the hearing date and thus were not represented, leading to a violation of natural justice. The revenue's counsel contended that the Tribunal had provided sufficient opportunities for the appellant to present their case.The High Court reviewed the order and found that the Tribunal had proceeded to decide the appeal on merits without granting the appellant sufficient opportunity to be heard. This lack of opportunity was deemed prejudicial to the appellant's interests. Consequently, the High Court allowed the appeal, set aside the Tribunal's order, and remitted the case back to the Tribunal for fresh consideration after ensuring both parties have the opportunity to be heard in accordance with the law. No costs were awarded.The significant holdings include the setting aside of the Tribunal's order due to a violation of principles of natural justice, emphasizing the importance of providing parties with a fair opportunity to present their case. The Court's decision highlights the fundamental principle of procedural fairness in legal proceedings.