2025 (2) TMI 296 - HC - Income Tax

Validity of the order passed by ITAT - contravention of the well settled jurisprudential principles of natural justice - As alleged order of the NFAC was an ex-parte order as it was passed in absence of a hearing being granted to the petitioner/his representative. HELD THAT - Violation of the settled principles of natural justice is not just apparent but real palpable and clearly visible. The petitioner is deprived of an opportunity to present its case not only before the respondent no. 2 but also subsequently before the ITAT. In not affording a reasonable opportunity to the petitioner to present its case had perpetuated from the ex-parte order passed by respondent no. 2 which in our opinion was not noticed by the ITAT in passing the impugned order. Not disputed that the jurisdictional assessing officer i.e. respondent no. 2 under the faceless regime passed an ex-parte assessment order without affording an opportunity to the petitioner of being heard. Thus evaluation of assessment of the petitioner s income and rejecting the submissions of the petitioner was undertaken also ought to have been appropriately undertaken by following the natural rules of fairness adhering to the principles of natural justice and such infirmity at least should have been addressed by the ITAT in passing the impugned order. A perusal of the impugned order of the ITAT makes it clear that it proceeded to deal with the case of the petitioner on merits as is evident from paragraph 5 of its order. The petitioner submitted that considering the fact that the order impugned before the ITAT itself was passed by respondent no. 2 was passed ex-parte it would be just and proper for the ITAT to remand the matter to respondent no. 2 for passing orders on merits after considering submissions of the petitioner. Also the written submissions being tendered on behalf of the petitioner before the ITAT on 12 March 2024 the same appear to have not being considered in the impugned order being passed by the Tribunal. We accordingly remand the proceedings to the ITAT i.e. respondent no. 1 for de novo hearing of the petitioner s appeal filed before it. ITAT shall after hearing the parties pass fresh orders on merits.

Summary

1. Issues Presented and Considered

The primary legal issue considered by the Court was the legality and validity of the order passed by the Income Tax Appellate Tribunal (ITAT) on March 12, 2024. The petitioner alleged that the order was issued without providing an opportunity for a hearing and without considering the written submissions, thus violating principles of natural justice.

2. Issue-Wise Detailed Analysis

Legal Framework and Precedents

The petition was filed under Article 226 of the Constitution of India, challenging the ITAT's order under Section 254(1) of the Income Tax Act, 1961. The petitioner argued that the ITAT's actions contravened the principles of natural justice, specifically the right to a fair hearing as enshrined under Article 14 of the Constitution.

Court's Interpretation and Reasoning

The Court emphasized the importance of the principles of natural justice, particularly the right to be heard (audi alteram partem), which is integral to Article 14 of the Constitution. The Court referenced the Supreme Court's decision in Delhi Transport Corporation v. DTC Mazdoor Union, which underscored the necessity of a fair hearing when an administrative order adversely affects an individual.

Key Evidence and Findings

The petitioner, a retired serviceman, had filed an appeal against an ex-parte assessment order by the jurisdictional assessing officer, which was confirmed by the NFAC. The petitioner contended that the ITAT denied a fair hearing by refusing to remand the matter for reconsideration and by not considering the written submissions and paper book provided.

Application of Law to Facts

The Court found that the ITAT failed to adhere to the principles of natural justice by not providing a reasonable opportunity for the petitioner to present his case. The ITAT's decision to proceed on merits without considering the petitioner's submissions was deemed inappropriate, especially given the ex-parte nature of the initial assessment order.

Treatment of Competing Arguments

The respondents argued that the petitioner had multiple opportunities to present his case and that the ITAT had correctly analyzed the merits, particularly concerning the applicability of Section 89 of the IT Act. However, the Court disagreed, noting that the ITAT's failure to consider the petitioner's submissions and the procedural irregularities warranted a remand.

Conclusions

The Court concluded that the ITAT's order was issued in violation of natural justice principles and that the petitioner was denied a fair opportunity to present his case. Consequently, the Court decided to set aside the ITAT's order and remand the matter for a de novo hearing.

3. Significant Holdings

Core Principles Established

The Court reaffirmed the necessity of adhering to natural justice principles in administrative and quasi-judicial proceedings, emphasizing the right to a fair hearing as fundamental under Article 14 of the Constitution.

Final Determinations on Each Issue

The Court determined that the ITAT's order dated March 12, 2024, was invalid due to procedural deficiencies and a lack of adherence to natural justice principles. The proceedings were remanded to the ITAT for a fresh hearing, with instructions to consider the petitioner's submissions and pass an order on merits within six weeks.

The Court's decision underscores the judiciary's role in ensuring fairness and procedural propriety in administrative processes, particularly in tax-related disputes where the rights of individuals are significantly impacted.