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of <h1>High Court overturns penalty order under Income Tax Act due to breach of natural justice principles. Fresh hearing ordered.</h1> <h3>CHECKMATE SERVICES PRIVATE LIMITED Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 (1) (1), VADODARA</h3> CHECKMATE SERVICES PRIVATE LIMITED Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1 (1) (1), VADODARA - TMI Issues:Challenge to penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2010-11 based on violation of principles of natural justice.Analysis:The petitioner filed a petition under Article 226 of the Constitution of India seeking to set aside a penalty order under section 271(1)(c) of the Income Tax Act, 1961, imposing a penalty of Rs. 53,36,430 for the Assessment Year 2010-11. The petitioner company was involved in a survey proceeding where an investment in property was questioned, leading to an addition in assessment. The CIT(Appeals) partly allowed the appeal, but the Income Tax Appellate Tribunal confirmed the addition and issued a penalty notice under section 271(1)(c) of the Act. The petitioner challenged the penalty order, alleging a violation of principles of natural justice due to inadequate time provided for response. The respondent denied the allegations, arguing that the penalty notice did not specify the grounds for initiating penalty proceedings. The High Court noted a serious flaw in the hearing process, as the petitioner was given less than 24 hours to respond, breaching principles of natural justice.The Court observed that the short notice period for the petitioner to appear and respond to the penalty order was a clear violation of natural justice. Despite a request for adjournment, the penalty order was passed hastily, indicating a lack of fair opportunity for the petitioner to present their case. The Court held that such a breach of principles of natural justice warranted intervention, leading to the quashing and setting aside of the penalty order dated 30.11.2022. The Court directed that a fresh opportunity of hearing be provided, starting from where it was left off, within four weeks from the date of the order. The petitioner was instructed to cooperate, and the entire proceedings were to be completed within eight weeks thereafter. The petition was disposed of accordingly.
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