2017 (11) TMI 125 - HC - Income Tax

Enhancement of assessment pursuant to notice u/s 251 (1)(a) - Power of CIT(A) - no opportunity to contest the proposal for enhancement granted - violation of principles of natural justice - Held that - The first respondent issued a notice under Section 251 (1)(a) of the Act proposing an enhancement of the income and directed the petitioner to show-cause against the proposal on or before 12.12.2016. Subsequently, a notice was issued by the first respondent dated 10.03.2017 stating that the appeal petition filed by the petitioner against the assessment order dated 12.03.2015 along with the proposal of enhancement of assessment would be heard on 23.03.2016 at 02.30pm. The petitioner would state that the date fixed for hearing having been mentioned as 23.03.2016, the petitioner ignored the said notice as being an incorrect notice and expected a fresh notice would be issued by the first respondent. However, the impugned order came to be passed on 28.03.2017 by which the petitioner s appeal petition against the assessment order dated 12.03.2015 has been allowed and simultaneously the proposal made by the first respondent for enhancement of assessment vide notice dated 10.11.2016 has been confirmed. It is clear that to the said extent, the impugned order suffers from violation of principles of natural justice as the petitioner did not have adequate opportunity to put forth their submissions. There was no response filed by their authorized representative to the notice dated 10.03.2017 and what has been stated in Paragraph 4.5 is factually incorrect. Thus, taking note of the fact that the petitioner should have an opportunity to put forth their objections with regard to the proposal for enhancement as the proposal in the notice impugned to that extent requires to be set aside, and the matter remanded to the first respondent for fresh consideration, who shall issue a fresh notice of hearing giving reasonable opportunity to the petitioner, hear the petitioner in person and pass a reasoned order on merits

Summary

Issues involved:
Challenge to order enhancing assessment under Income Tax Act, 1961 due to lack of opportunity to contest the proposal for enhancement of assessment.

Analysis:
The petitioner filed a writ petition seeking to quash an order passed by the first respondent under Section 251 of the Income Tax Act, 1961, which enhanced the assessment of the petitioner's income by the second respondent. The petitioner contended that they were not given a proper opportunity to contest the proposal for enhancement of assessment. The first respondent issued a notice proposing an enhancement of income and directed the petitioner to respond, but there was confusion regarding the hearing date. The impugned order confirming the enhancement of assessment was passed without adequate opportunity for the petitioner to present their case, violating principles of natural justice. The Revenue explained the date discrepancy as a typographical error but failed to rectify it, leading to the violation of the petitioner's rights. The petitioner argued that there was no response filed by their representative to the notice, and factual inaccuracies were present in the order. Therefore, the Court set aside the impugned order and remanded the matter to the first respondent for fresh consideration, emphasizing the need for a fair hearing, reasonable opportunity for the petitioner, and a reasoned order in accordance with the law.

This judgment highlights the importance of adhering to principles of natural justice and providing parties with a fair opportunity to present their case in matters of tax assessment. It underscores the significance of clear communication and rectification of errors to ensure a transparent and just decision-making process. The Court's decision to set aside the order and remand the matter for fresh consideration serves as a reminder of the judiciary's commitment to upholding procedural fairness and protecting the rights of parties involved in legal proceedings.