2024 (7) TMI 847 - HC - Income Tax

Validity reassessment order - order passed in violation of the principle 'he who decides must hear' - order not passed by the Officer who heard the petitioner -HELD THAT - The doctrine 'he who heard must decide / he who decides must hear' applies to statutory authorities. Section 148A of the Act provides for opportunity of being heard to the assessee. If the officer who hears does not render the decision, it would amount to violation of the principles of natural justice. Since Ext.P6 order is not passed by the Officer who heard the petitioner, Ext.P6 order is set aside. Consequently Ext.P7 notice under Section 148 is also set aside. AO shall pass fresh orders pursuant to Ext.P3 show cause notice after affording an opportunity of hearing to the petitioner, as expeditiously as possible.

Summary

Issues:
1. Challenge to order passed by Assessing Officer under Section 148A of the Income Tax Act, 1961.
2. Validity of Ext.P6 and P7 orders issued without jurisdiction.
3. Compliance with principles of natural justice in passing Ext.P6 order.

Analysis:
1. The petitioner challenged the Ext.P6 order passed by the Assessing Officer under Section 148A of the Income Tax Act, 1961. The Assessing Officer issued a show cause notice under Clause (b) of Section 148A, stating that income chargeable to tax for the assessment year 2017-18 had escaped assessment. The petitioner submitted a reply to the notice and was given an opportunity of hearing. Subsequently, Ext.P6 proceedings were initiated under Clause (d) of Section 148A, asking the petitioner to file a return for the said year. The petitioner argued that Ext.P6 and P7 orders were issued without jurisdiction as they were not passed by the person who heard the petitioner. Additionally, the petitioner contended that the threshold of Rs. 50 lakhs required to invoke the extended period of limitation under Section 149 had not been met.

2. Section 148A mandates that the Assessing Officer, before issuing any notice under Section 148, must conduct an enquiry, provide an opportunity of being heard to the assessee, and decide whether it is a fit case to issue a notice under Section 148. The petitioner argued that Ext.P6 order was passed in violation of the principle 'he who decides must hear.' The court observed that the doctrine 'he who heard must decide / he who decides must hear' applies to statutory authorities. As Ext.P6 order was not passed by the Officer who heard the petitioner, it amounted to a violation of natural justice principles. Consequently, Ext.P6 order and Ext.P7 notice under Section 148 were set aside, and the Assessing Officer was directed to pass fresh orders after affording an opportunity of hearing to the petitioner.

3. In the judgment delivered by the Honourable Mr. Justice Murali Purushothaman, it was emphasized that the principle of natural justice, specifically the right to be heard, must be adhered to by statutory authorities. The court held that failure to have the officer who heard the petitioner render the decision would amount to a violation of natural justice principles. Therefore, the court set aside the Ext.P6 order and Ext.P7 notice, directing the Assessing Officer to reevaluate the case after providing the petitioner with a fair opportunity to present their case. The judgment highlighted the importance of procedural fairness and adherence to legal principles in administrative actions related to tax assessments.