Violation of Natural Justice Principles: Allahabad HC imposes Costs of Rs 10,000 on Income Tax Authority [Read Order]

The Allahabad High Court imposed costs of Rupees 10,000/- on the Income Tax Authority for violation of natural justice principles.

The petitioner, M/s M.L. Chains, deals in the business of gold bars and gold ornaments. A notice under Section 142(1) of the Income Tax Act was issued to the petitioner later a show cause notice under section 272-A(1)(d) of the Income Tax Act was issued and after considering all the details, completed the assessment under section 143(3) of the Income Tax Act on a total return income of Rs. 53,91,630/-.

The Counsel for the petitioner submitted that the impugned proceedings are bad in law as the same have been initiated on the change of opinion and that the respondent passed the impugned order without giving any opportunity of hearing to the assessee, has passed the impugned order.

The Counsel further submitted that no inquiry as contemplated under section 263 of the Income Tax Act was conducted by the respondent before passing the impugned order and the inquiry, if any, was conducted behind the back of the petitioner without any opportunity.

The Standing Counsel for the Department supported the impugned order by submitting that full opportunity was given to the petitioner and the notice was duly served and thereafter, the petitioner submitted its reply and after considering the reply, the impugned order has been passed and that on the date fixed, the reply was not submitted, but on the subsequent date the reply was submitted and after considering the same, the impugned order has been passed.

Since there is an apparent violation of the principles of natural justice, as no opportunity was given to the petitioner for defending or presenting its case, the impugned order cannot be sustained in the eyes of law in view of the law laid down by the Apex Court in Whirlpool Corporation v. Registrar of Trade Marks Mumbai.

A Single Bench of Justice Piyush Agarwal observed that “The said submission, on the face of it, has no legs to stand on, as the instant proceedings and the impugned order have been passed pursuant to the notice under section 263 of the Income Tax Act. Once the respondent – authority himself records that no response has been filed in pursuance of the notice under section 263 of the Income Tax Act, a contrary finding, as recorded in the impugned order, cannot be accepted in the eyes of law.”

The Court also noted that the writ petition is allowed with a cost of Rs. 10,000/-, which shall be deposited by the respondent concerned with the Allahabad High Court Legal Services Committee, Allahabad within a period of one month from today.

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