Income Tax Hearing Date cannot be Advanced without Intimating Assessee: Orissa HC sets aside Order rejecting S. 154 Application [Read Order]

The Orissa High Court has held that an income tax authority cannot advance a scheduled hearing date and pass an adverse order without duly informing the assessee, as such action violates the principles of natural justice.

Chief Justice Harish Tandon and Justice M.S. Raman set aside an order rejecting a rectification application filed under Section 154 of the Income TaxAct, 1961, after finding that the Assessing Officer (AO) passed the order prior to the date fixed for personal hearing, denying the assessee a mandatory opportunity of being heard.

With regard to the advancement of the hearing, the high court opined that “When the Authority fixed date of hearing on 28th July, 2025, it was incumbent upon him to ascertain whether the date advanced was made known to the assessee before passing the order in his absence.”

In the matter of Viswa Bharati Foundation Trust, a charitable trust enjoying exemption benefits pursuant to registration under Section 12AA. The Trust had been granted provisional registration in Form 10AC in May 2021, which was later corrected in August 2023 to cover the assessment years 2022-23 to 2026-27.

Despite the corrected registration, the Trust’s case was taken up for compulsory scrutiny and an ex parte assessment was framed under the faceless assessment regime.

Aggrieved by this, the Trust moved a rectification application under Section 154 on 29 April 2025, which the AO rejected on 18 July 2025 on the ground that there was no mistake apparent on record.

The Department had fixed a personal hearing on 28 July 2025 at 11:00 a.m., but the AO advanced the matter and passed the rejection order on 18 July 2025, i.e., before the scheduled hearing date, without any material to show that the advancement of the hearing was communicated to the assessee.

The Trust contended that Section 154(3) mandates a reasonable opportunity of being heard where a rectification order is proposed to be passed to the prejudice of the assessee, and that such opportunity was plainly denied.

The Revenue fairly conceded that the record reflected the position as stated by the petitioner.

Therefore, the High Court observed that once a hearing date is fixed, the authority is duty-bound to make sure that any advancement of the date is duly intimated to the assessee.

The bench said that “Section 154(3) of the IT Act obligates the Authority to afford opportunity of hearing. Since the order passed under Section 154 affecting the claim of the petitioner-assessee prior to the date fixed for hearing, the same cannot be sustained for want of adherence to the principles of natural justice. Therefore, indulgence in the matter is warranted.”

Accordingly, the High Court set aside the order dated 18 July 2025 rejecting the Section 154 application and remanded the matter to the Assistant Commissioner of Income Tax (Exemption Circle) to decide the rectification application afresh after granting the Trust a proper opportunity of hearing.

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