2023 (11) TMI 343 - HC - Income Tax

Court Quashes Tax Order and Notice Under Sections 148 and 148A(d) Due to Procedural Lapses and Denial of Hearing.

The court quashed the order dated 19th April 2023 under Section 148A(d) and the notice under Section 148 of the Income-tax Act, 1961, due to improper ... Approval under Section 151 of the Income-tax Act - non-application of mind - application of Section 149(1) to determine competent sanctioning authority - notice under Section 148A(b) of the Act - order under Section 148A(d) of the Act - issue of notice under Section 148 of the Act - right to personal hearing under Section 148A(b)Approval under Section 151 of the Income-tax Act - non-application of mind - application of Section 149(1) to determine competent sanctioning authority - order under Section 148A(d) of the Act - issue of notice under Section 148 of the Act - Validity of the approval/sanction under Section 151 and attendant acts (recommendation by Additional/Joint Commissioner and grant by PCIT) given the stated time-limit and competence to grant approval. - HELD THAT: - The Court found that the form for approval wrongly recorded the time-limit as falling under Section 149(1)(b) (for more than 3 years but not more than 10 years) when the proceedings related to AY 2019-20 and the notice under Section 148A(b) was dated 28 March 2023 (i.e., within three years). That misclassification meant the approval was granted by an officer lacking competence if Section 149(1)(b) were applicable. The Additional/Joint Commissioner who recommended and the PCIT who granted approval did so mechanically and without application of mind, having failed to read the approval form and the order under Section 148A(d). The affidavit filed in reply did not satisfactorily explain this glaring error. Because the approval, recommendation and grant were made without proper consideration of the applicable time-limit and competent sanctioning authority, the Court concluded the approval process was vitiated and the consequential order and notice could not stand. [Paras 2, 3, 4, 5]Application for approval, its recommendation and grant were made without application of mind and are vitiated; the order under Section 148A(d) and the consequent notice under Section 148 cannot be sustained on that ground.Notice under Section 148A(b) of the Act - right to personal hearing under Section 148A(b) - order under Section 148A(d) of the Act - Whether an assessee is entitled to a personal hearing at the stage of Section 148A(b) and whether refusal to grant such a hearing (or recording that none was requested) was permissible. - HELD THAT: - The Court held that Section 148A(b)'s requirement to 'provide an opportunity of being heard to the assessee' contemplates a personal hearing at that stage. The approval form itself (row 16) enquires whether a personal hearing was requested, which demonstrates that the stage for personal hearing is the Section 148A(b) process and not deferred to later assessment proceedings. The Assessing Officer's order under Section 148A(d) recorded that a personal hearing request had been made but was refused as 'premature'; the affidavit in reply did not deny the specific allegation. The Court therefore directed that respondents must grant a personal hearing, if requested, before passing any order under Section 148A(d), observing that such hearings may enable early closure of proceedings if the assessee satisfies the officer. [Paras 6, 7]An assessee is entitled to a personal hearing at the Section 148A(b) stage if requested; respondents must grant such hearing before passing any order under Section 148A(d).Final Conclusion: The order dated 19th April 2023 passed under Section 148A(d) of the Act and the notice dated 19th April 2023 issued under Section 148 are quashed and set aside; petition disposed. Issues involved:The issues involved in this case are the validity of a notice issued under Section 148A(b) of the Income-tax Act, 1961, the order passed under Section 148A(d) of the Act, and the subsequent notice issued under Section 148 of the Act.Issue 1 - Approval under Section 151 of the Act:The Petitioner challenged the approval granted under Section 151 of the Act, alleging a total non-application of mind by the Principal Commissioner of Income-Tax Officer-19. The Respondent attempted to justify the sanction, stating it was within the 3-year limit for the Assessment Year 2019-20. The court agreed with the Petitioner, noting the lack of application of mind in granting the approval.Issue 2 - Non-application of mind in granting approval:The court found discrepancies in the approval process, as the officers involved failed to consider the time limit for current proceedings correctly. The Additional/Joint Commissioner of Income-tax and the PCIT granted approval mechanically without proper scrutiny, leading to the erroneous issuance of the notice under Section 148A(b) of the Act.Issue 3 - Denial of personal hearing:The Petitioner alleged that personal hearing was denied by Respondent No. 1, citing it as premature. The court disagreed with the Respondent's argument that Section 148A(b) does not mandate a personal hearing, emphasizing that providing an opportunity to be heard implies a personal hearing. The court directed that in every case, a personal hearing must be granted before passing an order under Section 148A(d) of the Act if requested by the Petitioner.Conclusion:The court quashed and set aside the order dated 19th April 2023 passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act, highlighting the lack of proper application of mind and denial of personal hearing in the case. The petition was disposed of accordingly.