Court sets aside order under Income Tax Act, directs fresh hearing due to procedural issues

The court set aside the order under Section 179 of the Income Tax Act, 1961, directing a fresh hearing for the petitioner due to procedural irregularities and lack of notice, emphasizing adherence to natural justice principles. The court restricted the petitioner's dealings with immovable properties and withholding refunds until the matter's conclusion, aiming for a just resolution within a specified timeframe.

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Issues:
1. Impugning an order under Section 179 of the Income Tax Act, 1961.
2. Quashing of recovery proceedings for outstanding demand.
3. Stay of recovery of demand amount.
4. Allegation of lack of notice and violation of principles of natural justice.
5. Applicability of Section 179 of the Act.
6. Dispute regarding the service of notice.
7. Setting aside the impugned order and directing a fresh order under Section 179.

Analysis:
The petitioner challenged an order passed under Section 179 of the Income Tax Act, 1961, seeking to quash recovery proceedings for an outstanding demand of Rs. 28,71,84,883. The Income Tax Department claimed the amount from a company where the petitioner was a director. The petitioner alleged lack of awareness of the proceedings and non-receipt of the notice. The main grievance was the violation of natural justice principles due to the absence of a show cause notice and hearing. The court examined the contentions, focusing on the applicability of Section 179 and the service of notice.

The court noted discrepancies in the communication process, as the petitioner claimed ignorance of the proceedings until later notifications. Despite the respondent's assertion of attempting to contact the petitioner through another letter, no evidence of further correspondence was presented. The court highlighted the lack of clarity on whether the order under Section 179 was served to the petitioner and observed the absence of recovery steps post-order. Consequently, the court decided to set aside the impugned order and directed a fresh hearing for the petitioner to file a reply to the notice under Section 179. The court emphasized the need for a fair hearing and timely resolution of the proceedings, restricting the petitioner's dealings with immovable properties and withholding refunds until the matter's conclusion.

In conclusion, the court disposed of the writ, refraining from imposing any costs. The judgment aimed to rectify procedural irregularities, ensure adherence to natural justice principles, and facilitate a just resolution under Section 179 of the Income Tax Act within a specified timeframe.

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