2022 (8) TMI 692 - HC - Income Tax

Reopening of assessment - Validity of order u/s 148 A(d) - gross violation of the principles of natural justice - HELD THAT - From the facts as admitted in the short counter affidavit it is undisputed that the impugned order has been passed by the respondents arbitrarily and in gross violation of the principles of natural justice. Therefore, the impugned order dated 30.03.2022 u/s 148 A(d) and the impugned order u/s 154 both passed by the respondent no.2 and the impugned notice u/s 148 can not be sustained and are hereby quashed. We are frequently coming across cases where Income Tax Authorities are giving complete go by to the principles of natural justice. The excuse orally being set up usually by the departmental counsels is that there is some problem in the computerisation system which is solely controlled by the respondent no.1 i.e. the Central Board of Direct Taxes, New Delhi, and they can not, at their own, correct the system. The practice of frequently violating principles of natural justice, non consideration of replies of assessee under one pretext or the other or rejecting it with one or two lines orders without recording reasons for rejection, is gradually increasing which needs to be taken care of immediately by the respondents at the highest level, otherwise prevailing situation of arbitrary approach and breach of principles of natural justice may not only adversely affect the assessee who pay revenue to the Government, but also may develop a perception amongst people/assessee that it is difficult to get justice from the authorities in statutory proceedings. For all the reasons aforestated, the impugned order and the notice as aforesaid are quashed. Liberty is granted to the respondents to pass an order afresh under Section 148A(d) of the Act 1961 after affording reasonable opportunity of hearing to the petitioner. The respondent no.1 is directed to take forthwith all required steps to remove shortcomings in the system and to develop a system of accountability of erring officers/employees.

Summary

Issues:
Challenging orders under Section 148A(d) and Section 154 of the Income Tax Act, 1961, alleging non-consideration of reply and arbitrary decision-making.

Analysis:
The petitioner filed a writ petition seeking to quash the orders passed under Section 148A(d) and Section 154 of the Income Tax Act, 1961, along with a notice under Section 148 of the Act. The petitioner claimed that despite submitting a reply to the notice dated 22.03.2022 on 29.03.2022, the authorities passed orders stating no reply was received. The court, on initial examination, found the impugned orders to be erroneous as the petitioner had evidence of submitting the reply. The respondents were directed to file a counter affidavit to clarify the situation. An interim measure was imposed to keep the impugned notice and orders in abeyance until further review.

Subsequently, the respondents failed to file a counter affidavit despite court orders, leading to a directive for their personal appearance if the affidavit was not submitted promptly. A counter affidavit was eventually filed, acknowledging the receipt of the petitioner's reply but justifying the orders based on the reply not reflecting in the digital records. The court, after considering the counter affidavit, found that the impugned orders were passed arbitrarily and in violation of natural justice principles. Consequently, the orders under Section 148A(d) and Section 154 of the Act, along with the notice under Section 148, were quashed.

The court expressed concern over the frequent disregard for natural justice principles by Income Tax Authorities and emphasized the need for accountability in the system. It highlighted the adverse impact on assessees due to arbitrary actions and stressed the importance of ensuring justice in statutory proceedings. The judgment emphasized the responsibility of the authorities to rectify system shortcomings promptly and establish accountability mechanisms to prevent harassment of assessees. The court granted liberty to the respondents to pass a fresh order under Section 148A(d) after providing a fair hearing to the petitioner. Additionally, the respondents were directed to address system deficiencies and ensure accountability among officers and employees. The writ petition was allowed with costs imposed on the respondents to be paid to the petitioner within a specified timeframe.