2024 (8) TMI 181 - HC - Income Tax

Non responding to notice u/s 142(1) - Cash deposit during the demonetization period - as argued petitioner was not given an opportunity of hearing to explain the source of cash deposit during the demonetization period - HELD THAT - This Court does not agree with the contention of the learned counsel for the petitioner that the petitioner was not given an opportunity of hearing to explain the source of cash deposit of Rs.10,00,000/- during the demonetization period. The facts mentioned in the counter affidavit would disclose that the petitioner has failed to avail an opportunity of hearing, despite having been served with notices. Therefore, the petitioner probably cannot contend that he was not afforded an opportunity of hearing. Revisional order u/s 264 without affording an opportunity of hearing - Question of giving an opportunity of hearing by the Revisional Authority is concerned, though Section 264 does not specifically provides giving an opportunity of hearing, but the opportunity of hearing has to be read in the provision, inasmuch as the revisional order has civil consequences and without affording an opportunity of hearing, the order would not be sustainable. Since, there has been violation of the principles of natural justice by the Revisional Authority in passing the impugned order without affording an opportunity of hearing, Ext.P11 order is set aside and the matter is remanded back to the 1st respondent. The 1st respondent is directed to issue a notice of hearing to the petitioner, and after hearing the petitioner pass a fresh order, in accordance with the law. It is made clear that, only one notice shall be issued to the petitioner and if the petitioner fails to avail the opportunity of hearing in pursuance to the said notice, no further opportunity shall be afforded to the petitioner.

Summary

Issues:
1. Opportunity of hearing under Section 142(1) of the Income Tax Act, 1961.
2. Revisional order under Section 264 of the Income Tax Act, 1961 without affording an opportunity of hearing.

Analysis:
1. The petitioner, a Non-resident Indian, filed an income tax return for the assessment year 2017-18, declaring a total income of Rs.5,61,000 and remitted tax accordingly. Subsequently, notices under Section 143(2) and 142(1) were issued regarding cash deposits during demonetization. Despite multiple opportunities, the petitioner did not respond, leading to the assessment order being passed on 25.12.2019. The petitioner argued insufficient time was given to respond before the order was passed.

2. The petitioner challenged the assessment order through a revision under Section 264 of the Income Tax Act, 1961. The Revisional Authority passed an order without providing an opportunity for a hearing. The counsel for the Income Tax Department argued that the petitioner had adequate chances to explain the cash deposit but failed to do so. The counsel contended that the revisional order did not require an opportunity of hearing as per Section 264 of the Act.

3. The High Court examined the submissions and found that the petitioner had indeed been given opportunities to be heard but failed to respond. However, regarding the revisional order, the Court held that even though Section 264 does not explicitly mention providing an opportunity of hearing, such an opportunity must be implied due to the civil consequences of the revisional order. As the Revisional Authority did not afford a hearing before passing the order, the Court set aside the order and remanded the matter back for a fresh order after providing the petitioner with a single opportunity for a hearing. It was emphasized that failure to avail this opportunity would not lead to further chances for the petitioner.

In conclusion, the High Court partially allowed the writ petition, emphasizing the importance of affording an opportunity of hearing in such matters to uphold principles of natural justice.