1968 (3) TMI 20 - HC - Income Tax

Change of jurisdiction to successor ITO - when the successor imposed the penalty without giving any opportunity to the assessee and hearing - held that the ITO was bound to give the assessee an opportunity of being heard and the order imposing penalty was not legal

Summary

Issues:
1. Interpretation of sub-section (3) of section 28 of the Income-tax Act, 1922 regarding the obligation to provide an opportunity of being heard before imposing a penalty.
2. Application of section 5(7C) of the Act in cases of transfer of jurisdiction between Income-tax Officers.
3. Determining whether the successor officer has the authority to continue penalty proceedings without granting a fresh opportunity of being heard.

Analysis:

1. The primary issue in this case revolves around the interpretation of sub-section (3) of section 28 of the Income-tax Act, 1922, which mandates that no order imposing a penalty shall be made unless the assessee has been heard or given a reasonable opportunity of being heard. The question before the court was whether the Income-tax Officer, C-Ward, was obligated to provide the assessee with an opportunity of being heard before imposing a penalty of Rs. 10,000, considering the transfer of jurisdiction from the Income-tax Officer, B-Ward.

2. The court examined the provisions of section 5(7C) of the Act, which deal with the transfer of jurisdiction between Income-tax Officers. The court noted that the assessee had the right to demand a reopening of the proceedings or to be reheard before any order for assessment is passed against them. The failure of the Income-tax Officer, C-Ward, to inform the assessee about the penalty proceedings after the disposal of the quantum appeal was deemed a violation of natural justice.

3. The court considered precedents from other High Courts to determine the authority of a successor officer to continue penalty proceedings without granting a fresh opportunity of being heard. While the department cited cases where penalty proceedings were continued based on written representations submitted by the assessee, the court emphasized the importance of providing a genuine opportunity for the assessee to present their case before imposing a penalty. Rulings from various High Courts supported the view that the successor officer must afford the assessee an opportunity to be heard before passing a penalty order.

In conclusion, the court ruled in favor of the assessee, emphasizing the significance of providing a fair opportunity for the assessee to present their case before any penalty is imposed. The judgment highlighted the importance of adhering to procedural fairness and ensuring that the assessee's right to be heard is respected in penalty proceedings.