2023 (12) TMI 219 - HC - Income Tax

Assessment order quashed for denying personal hearing opportunity despite assessee's reply under Section 129

The HC allowed the writ petition filed by the assessee against an assessment order passed without providing opportunity of personal hearing. The court ... Principles of natural justice - opportunity of personal hearing - continuity of proceedings and right to demand re-hearing on change of Assessing Officer under Section 129 of the Income tax Act - speaking order - remand for fresh considerationPrinciples of natural justice - opportunity of personal hearing - speaking order - Validity of the assessment order dated 30.07.2022 in view of non provision of opportunity of personal hearing and requirement to pass a speaking order - HELD THAT: - The Court found that the earlier assessment dated 15.03.2021 had been quashed for lack of hearing and remitted for a speaking order after considering the petitioner's reply. The respondent, after becoming aware of the quashal, issued notices calling for details but did not afford any personal hearing after receipt of the petitioner's responses and thereafter passed the impugned order dated 30.07.2022. The notices seeking information and the petitioner's written replies could not be equated with an opportunity of personal hearing, which is required before passing an assessment order when objections have been filed. On the materials, no evidence was shown that a personal hearing was granted or that the petitioner was re heard before the impugned order was passed; accordingly the order was held to be passed in clear violation of the principles of natural justice and contrary to the Court's earlier direction to pass a speaking order after considering the reply. [Paras 6]The assessment order dated 30.07.2022 is invalid for having been passed without affording the petitioner a personal hearing and without compliance with the earlier direction to pass a speaking order after considering his reply.Continuity of proceedings and right to demand re-hearing on change of Assessing Officer under Section 129 of the Income tax Act - opportunity of personal hearing - Effect of transfer/continuation of proceedings to a new Assessing Officer and whether failure of the assessee to request re hearing absolves the successor AO from affording a personal hearing - HELD THAT: - Section 129 permits a succeeding Income tax authority to continue proceedings from the stage left by the predecessor but expressly preserves the assessee's right to demand re opening or to be re heard before any assessment order is passed. The Court held that the statutory right to be re heard requires the successor AO to afford an opportunity of hearing and that the absence of a specific demand from the assessee cannot be construed to relieve the authority of the duty to afford a hearing where the proceedings were remitted and objections/replies had been filed. The Department's contention that the petitioner failed to seek rehearing and therefore cannot complain was rejected as putting the cart before the horse. [Paras 6]Change of AO did not obviate the duty to afford a re hearing; the respondent could not rely on the absence of a demand from the petitioner to justify passing the impugned order without hearing.Remand for fresh consideration - personal hearing - Relief to be granted in consequence of the violation of natural justice and non compliance with earlier direction - HELD THAT: - Having concluded that the impugned order was passed in violation of natural justice and without complying with the earlier mandate to pass a speaking order after considering the petitioner's reply, the Court set aside the assessment order dated 30.07.2022 and remitted the matter to the respondent for fresh consideration. The Court directed that the petitioner be afforded a personal hearing and fixed a specific date for such hearing (subject to the respondent's convenience and refixing if necessary), on which the petitioner may produce supportive documents and the respondent shall thereafter pass orders in accordance with law. [Paras 6, 7]Impugned order set aside; matter remanded for reconsideration after affording the petitioner a personal hearing and for passing a speaking order in accordance with law.Final Conclusion: Writ petition allowed; assessment order dated 30.07.2022 set aside for breach of principles of natural justice and non compliance with earlier direction; matter remitted to the respondent to re consider the assessment after affording the petitioner a personal hearing and to pass a speaking order in accordance with law (personal hearing provisionally fixed). Issues Involved:The issues involved in this case are the assessment order passed by the respondent for the Assessment Year 2018-19, violation of principles of natural justice, non-provision of opportunity of personal hearing, and challenge to the assessment order dated 30.07.2022.Assessment Order Challenge:The petitioner, an assessee under the Income Tax Act, filed ITR-3 for AY 2018-19 declaring gross total income. The case was selected for limited scrutiny regarding agricultural income. Despite the petitioner filing responses and documents, the respondent passed an assessment order treating gross total income differently, leading to a demand. The petitioner challenged this order, resulting in its quashing and remittance for a speaking order. However, the respondent issued further notices and clarification letters, eventually passing a new assessment order on 30.07.2022, which the petitioner now challenges.Violation of Natural Justice:The petitioner's counsel argues that the impugned order was passed without providing an opportunity of personal hearing, violating principles of natural justice. The petitioner's main grievance is the lack of a personal hearing, as the respondent proceeded to pass the assessment order without considering the details furnished by the petitioner. The petitioner contends that the order was passed in gross violation of natural justice principles, as the new Assessing Officer did not inform about the change, denying the petitioner a chance for a rehearing.Respondent's Defense:The respondent contends that sufficient opportunities were provided to the petitioner before passing the assessment order. However, the petitioner's failure to seek a rehearing opportunity after the change of Assessing Officer is highlighted. The respondent assures compliance with any orders passed by the Court.Court's Decision:The Court notes that the earlier assessment order was quashed due to a lack of opportunity for the petitioner to be heard. Despite subsequent communications from the petitioner, the respondent did not provide a personal hearing before passing the impugned order. The Court finds that the order was passed in clear violation of natural justice, as no opportunity for personal hearing was granted after the petitioner's replies. Consequently, the impugned order is set aside, and the matter is remanded back to the respondent for re-consideration after providing the petitioner with a personal hearing scheduled for 20.12.2023.Conclusion:The Court allows the Writ Petition, setting aside the impugned order and directing a re-consideration of the assessment proceedings with a scheduled personal hearing for the petitioner. No costs are awarded, and connected Writ Miscellaneous Petitions are closed.