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2023 (8) TMI 1076 - HC - Income TaxPenalty order u/s 270A - Non affording mandatory hearing in terms of the legal requirements under Section 274(1) - assessment order passed u/s 143(3) r.w.s. 153C - HELD THAT - It is pointed out that for the purpose of initiating proceedings, there must be recovery of incriminatory material without which recourse cannot be had to Section 153C of the Act and that the only option available under such circumstance would be to proceed for reassessment under Sections 147 to 148 of the Act. Admittedly, there has been violation of principles of natural justice. Accordingly, case is made out for remanding the matter for fresh consideration while directing the Authority to embark upon reconsideration including the contentions raised regarding Section 153C of the Act with reference to the law laid down by the Apex Court in the case of Abhisar Buildwell 2023 (5) TMI 587 - SUPREME COURT The penalty order and the assessment order are set aside. The Authority to reconsider the matter in light of the discussion made above.
Issues involved:
The issues involved in the judgment are non-prosecution leading to dismissal of petition due to non-compliance of office objections, challenge against penalty order and assessment order under the Income Tax Act, 1961, lack of mandatory hearing as per legal requirements, jurisdiction to invoke Section 153C of the Act, violation of principles of natural justice, and setting aside of penalty and assessment orders for reconsideration. Non-prosecution and Restoration of Petition: The petition was dismissed for non-prosecution due to non-compliance of office objections. Subsequently, during the pendency of the application for recalling the dismissal order, the petitioner complied with the office objections. Consequently, the order of dismissal was recalled, and the petition was restored to the file. Challenge Against Penalty and Assessment Orders: The petitioner challenged the penalty order dated 26.09.2022 for the assessment year 2017-18 and sought to set aside the assessment order dated 10.03.2022. The contention raised was that the impugned orders, including the penalty order under Section 270A of the Income Tax Act, were passed without affording mandatory hearing as required under Section 274(1) of the Act. It was also argued that the assessment order passed under Section 143(3) read with Section 153C of the Act did not provide the opportunity of hearing as mandated by Section 143(3) of the Act. Additionally, it was contended that the Authority lacked jurisdiction to invoke Section 153C of the Act. Legal Arguments and Precedent: The petitioner's counsel argued that for initiating proceedings under Section 153C of the Act, there must be recovery of incriminatory material, without which the only recourse would be reassessment under Sections 147 to 148 of the Act. Reference was made to the judgment in the case of Principal Commissioner of Income Tax vs. Abhisar Buildwell Private Limited - 2023 SCC Online SC 481 to support this argument. Violation of Principles of Natural Justice: The Court acknowledged the violation of principles of natural justice in the case. Consequently, it was deemed appropriate to remand the matter for fresh consideration, directing the Authority to reconsider the contentions raised, particularly regarding Section 153C of the Act, in light of the legal principles established by the Apex Court in the case of Abhisar Buildwell. Court's Decision and Directions: The penalty order and assessment order were set aside, with the Authority instructed to reconsider the matter based on the discussions in the judgment. The respondent was directed to schedule a date for hearing, provide an opportunity for a personal hearing as required by law, and then pass fresh orders. As a result of the above considerations, the writ petition was allowed.
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