2015 (4) TMI 265 - HC - Income Tax

Assessment Order Voided for Violating Natural Justice: Fair Hearing and Disclosure Required

The Court held that the assessment order, based on a third party statement without providing the petitioner a copy or opportunity to respond, violated ... Reopening of assessment - Held that:- As the petitioner has been denied an opportunity of fair hearing by providing copy of the statement and related details regarding the alleged share amount, thus of the view that the matter requires to be re-considered by the respondent by providing fair and reasonable opportunity of hearing to the petitioner and by furnishing the details/copy of the statement based on which the impugned assessment order has been passed. - Decided in favour of assessee. Issues:Challenge to assessment order under Section 143(3) read with Section 147 for assessment year 2009-10 based on re-opening of assessment due to alleged undisclosed income from shares purchased, denial of fair hearing by not providing copy of sworn statement made by third party, reliance on third party statement without specific allegations against petitioner, violation of principles of natural justice.Analysis:The petitioner challenged the assessment order dated 30.06.2014 passed by the Income Tax Officer under Section 143(3) read with Section 147 for the assessment year 2009-10, which added an amount of &8377; 13,72,380 representing the sale proceeds of shares allegedly purchased using undisclosed income. The petitioner contended that the re-opening of assessment was based on a sworn statement made by a third party, Mr. Mukesh Choksi, without providing a copy of the statement. The petitioner argued that without being informed of the contents of the statement and without specific allegations against him, the assessment order was unjust. The petitioner highlighted the lack of opportunity to respond to the allegations and objected to the assessment based solely on the third party statement.The Court noted that the petitioner's request for a copy of the sworn statement made by Mr. Mukesh Choksi was not fulfilled, depriving the petitioner of the chance to understand the basis of the allegations against him. The Court emphasized that the assessment order solely relied on the third party statement without giving the petitioner a fair hearing. Drawing parallels to a similar case in the Delhi High Court, the Court underscored the importance of providing a fair and reasonable opportunity to the assessee before passing an assessment order based on third party statements.Consequently, the Court held that the assessment order was passed in violation of principles of natural justice as the petitioner was not provided with a copy of the statement or given an opportunity to respond to the allegations. The Court allowed the writ petition, quashed the impugned order, and directed the matter to be reconsidered by the respondent after providing the petitioner with a fair hearing and furnishing details of the statement on which the assessment order was based. The Court stressed the importance of adhering to fair procedures and ensuring that the assessee is given a genuine opportunity to present their case before any adverse order is passed.