2023 (11) TMI 942 - HC - Income Tax

Proceedings against Agents(representative assessee) u/s 163(1) - violation of principle of natural justice - petitioners have challenged the orders passed by the respondent on the principle ground that no opportunity of personal hearing has been provided to the petitioner before passing the impugned orders - HELD THAT - When the respondent-Department had initiated proceedings u/s 163 (1) of I.T. Act, by treating the petitioners as Agents of WBC, they ought to have provided an opportunity of personal hearing to the petitioners, since, in terms of Section 163 (2), provision of personal hearing is mandatory. As rightly pointed out by petitioner, the show cause notices issued by the respondent-Department requiring the petitioners to appear in person and file their replies could be deemed to be a notice providing an opportunity of personal hearing, since, by means of show cause notice, the petitioner can only be expected to file reply or objections to the query or any other issues raised in the show cause notices, and though even by means of such show cause notice, petitioners have been called upon to appear in person along with reply, that would be only for the purpose of enabling the Officer to arrive at a preliminary conclusion and thereafter, AO has to ascertain the facts with regard to the genuineness of documents, if any, produced by the Assessee, for which purpose, the assessee has to be heard. However, I find that, in the instant case, the petitioners have not been heard before passing the impugned orders and this is sufficient to hold that the impugned orders are unsustainable in the eye of law. Writ Petitions are allowed, the impugned orders are set aside and the matters are remanded back to the respondent for re-consideration, in which case, the respondent shall provide an opportunity of personal hearing to the petitioners by fixing a specific date for hearing.

Issues involved:
The challenge to orders passed by the Assistant Commissioner of Income Tax, International Taxation Circle 2(2), Chennai, dated 26.09.2023.

Issue 1: Opportunity of personal hearing not provided before passing impugned orders
- The petitioners challenged the orders on the ground of no opportunity of personal hearing provided before passing the impugned orders.
- Show cause notice under Section 163 (1) I.T. Act was issued, but no personal hearing granted before passing the impugned orders.
- Violation of principles of natural justice alleged by petitioners.
- Petitioners sought further time for detailed replies and personal hearing, but orders passed without granting such opportunity.

Issue 2: Show cause notice requirements under Section 163 (1) not fulfilled
- Petitioners argued that the show cause notice was deficient in fulfilling essential requirements under Section 163 (1) I.T. Act.
- Allegation that the notice did not meet the standards set by the law.
- Lack of jurisdiction claimed in the impugned orders.

Issue 3: Lack of jurisdiction and want of opportunity of personal hearing
- Petitioners contended that the impugned orders lacked jurisdiction.
- Respondent sought to recover disputed demand by treating petitioners as Agents under Section 163 (1) I.T. Act without providing a personal hearing.
- Grounds for challenging the impugned orders included lack of jurisdiction and absence of opportunity for personal hearing.

Judgment Details:
The Court considered the arguments presented by both parties and examined the records.

The Court noted that the petitioners, as Directors of a Foreign Company, were treated as Agents without being provided with an opportunity of personal hearing. The show cause notices issued did not constitute a proper opportunity for personal hearing, as the petitioners were required to file replies before any hearing took place. The impugned orders were passed without considering the petitioners' request for a detailed reply and a personal hearing, leading to a violation of principles of natural justice.

The respondent's argument that the petitioners failed to utilize the opportunity given to them was rejected by the Court. It was emphasized that the provision of personal hearing is mandatory under Section 163 (2) of the I.T. Act, and the show cause notices did not adequately fulfill this requirement. The Court found that the petitioners were not heard before the impugned orders were passed, rendering the orders unsustainable in the eyes of the law.

As a result, the Court allowed the Writ Petitions, setting aside the impugned orders and remanding the matters back to the respondent for reconsideration. The respondent was directed to provide a proper opportunity of personal hearing to the petitioners, allowing them to submit any additional documents in advance. The Court emphasized the importance of upholding principles of natural justice and safeguarding the interests of both the petitioners and the Revenue.

Furthermore, the Court clarified that the issue should be considered only in relation to the show cause notices issued for the three assessment years mentioned in the case. The impugned orders were to be set aside only concerning these specific assessment years.

In conclusion, the Writ Petitions were allowed, with no costs imposed, and the connected Writ Miscellaneous Petitions were closed.

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