The Kerala High Court while dismissing the petition, upheld the order of a single judge quashing the Assessment order passed under section 148 A(b) of the Income Tax Act, 1961 without affording reasonable opportunity to be heard.
The assessee, Asamannoor Service Co-Operative Bank Ltd challenged the Assessment order passed by the Income Tax Officer in terms of Section 148A(d) of the Income Tax Act and the consequential notice issued to the writ petitioner by the said Officer under Section 148 of the Income Tax Act, 1961 proposing a re-assessment of the income for the assessment year 2019-20.
The appellant had issued the notice under Section 148A(b) of the Income Tax Act calling upon it to show cause as to why a notice under Section 148 should not be issued, and the petitioner replied that it had no taxable income and was therefore advised not to file a return of income as no income had escaped assessment, the appellant herein proceeded to pass order without affording the petitioner an opportunity of being heard as mandated under Section 148A(b) of the Income Tax Act.
It was therefore contended that the order was vitiated on account of the non-compliance with the rules of natural justice, and consequently, notice too was vitiated in law. The Single Judge found that since Section 148A of the IT Act contemplated the provision of an opportunity to be heard by the assessee, the non-providing of a personal hearing to the assessee vitiated the impugned order and consequential notice.
The order and notice were therefore quashed, and the writ petitioner was directed to appear before the appellant herein on or before 27.10.2023 with all relevant documents in its possession for being heard. It was further made clear that if the petitioner did not appear on 27.10.2023, no further opportunity needed to be granted to it by the Income Tax Officer.
The appeal by the Revenue is premised on the contention that the express provisions of Section 148A speak of providing an opportunity to be heard by serving upon the assessee a notice to show cause within such time as may be specified in the notice being not less than seven days. The contention, in other words, is that so long as the show cause notice envisaged in Section 148A is issued to the assessee, the opportunity of being heard is to be seen as provided.
Sri. Jose Joseph, the Standing Counsel appeared for the appellant and Sri. Premjit Nagendran, the counsel appeared for the respondent/writ petitioner.
A division bench comprising Dr Justice A K Jayasankaran Nambiar & Dr Justice Kauser Edappagath observed that “while there is an obligation on the Revenue to provide an opportunity of being heard to the assessee by serving upon the assessee a show cause notice specifying the time by which he should prefer a reply, the service of the show cause notice by itself does not tantamount to a discharge of the obligation to provide the assessee with an opportunity of being heard, as contended by the Revenue. On the contrary, the service of show cause notice is only the first step in the process of extending an opportunity to be heard to the assessee and the purpose of the show cause notice is to confine the deliberations that are to follow to only those matters that are specified in the notice.”
It was further noted that by an amendment to the provisions of Section 148A(b) through the Finance Act, 2022 with effect from 1.4.2022, the requirement of providing an opportunity to be heard to the assessee was made less rigorous by omitting the requirement of obtaining prior approval of the specified authority before granting that opportunity. The deletion of the said pre-condition is a further indication that the relaxation of the statutory requirement of obtaining prior approval of the specified authority was intended to simplify the procedure for granting an opportunity to be heard to the assessee. The Court dismissed the petition.
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