Natural justice: lack of opportunity to be heard in Section 154 rectification led to remand for fresh adjudication.

Rectification under Section 154 was quashed insofar as it was issued without affording the assessee an opportunity to be heard; the Tribunal found the return processed under Section 143(1) and the subsequent Section 154 rectification, and the appellate entry, were effected without service or hearing and that departmental representatives did not dispute that omission. The Tribunal set aside the defectively issued rectification and remitted the matter to the Assessing Officer for fresh decision in accordance with law after providing the assessee a proper opportunity of hearing; appeal allowed for statistical purposes.

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Issues: Whether the rectification order passed under Section 154 of the Income-tax Act, 1961 by the Assessing Officer/CPC without providing the assessee an opportunity of hearing violated principles of natural justice and required remand for fresh adjudication.

Analysis: The Tribunal noted that the return was processed under Section 143(1) without a hearing and that the rectification order under Section 154 was subsequently passed by the AO/CPC in the absence of the assessee. The appellate order under challenge was also recorded without any indication of service or hearing. The Tribunal observed that neither of the taxing authorities provided the assessee an opportunity to be heard before altering the assessment, and that this procedural omission was acknowledged and not disputed by the departmental representatives.

Conclusion: The rectification order under Section 154 was set aside to the extent that it was passed without affording the assessee an opportunity of hearing. The matter is remitted to the Assessing Officer for fresh decision in accordance with law after providing due opportunity of hearing to the assessee. The appeal is allowed for statistical purposes in favour of the assessee.

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