In Aparna Ashram v. ADIT(E), the Delhi ITAT held that the Assessing Officer is bound to follow the natural justice principles for rectifying an order by invoking section 154 of the Income Tax Act, 1961.
In the instant case, the Assessing Officer rectified the original order passed against the assessee. The rectification resulted in an increase in the tax liability of the assessee.
Assessee, relying on the Apex Court decision in Chockalingam & Meyyappan Vs. CIT, contended that the authorities ought to have followed the principle of natural justice while passing the order.
The bench noted that as per Section 154(3) of the Income Tax Act amendment/rectification which has effect of enhancement of an assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made unless the authority concerned gives notice to the assessee of its intention to do so.
“Therefore, it is obligatory under the statute to issue notice by the Assessing Officer to give a reasonable opportunity of being heard to the Assessee. This is clearly set out under Section 154 of the Income Tax Act and it has to be followed by the tax authorities at the initial stages. If this procedure is not followed of issuing the notice and giving reasonable opportunity of being heard, further exercise will be non est. Therefore, the assessment order itself becomes void ab initio.”
Read the full text of the Order below.
