2025 (5) TMI 1960 - HC - Income Tax

Tax Order Invalidated: Procedural Fairness Prevails for Petitioner with Medical Challenges, Allowing Fresh Opportunity to Respond

Sohanlal Jain Ramesh Versus The Assessment Unit, Income Tax Department, Delhi

HC found the tax authority's order invalid due to procedural impropriety. The petitioner's medical condition prevented timely response to tax notices. The ... Validity of impugned order passed in violation of the principles of natural justice - non-consideration of the petitioner's medical condition and consequent non-grant of adequate opportunity to file a reply and appear for personal hearing - petitioner was admitted in the Hospital for removal of gallbladder, the petitioner was unable to either file their reply or to appear before the respondent for personal hearing. HELD THAT:- Reason assigned, for non-filing of reply to the show cause notices issued by the respondent, appears to be genuine. When such being the case, the respondent is supposed to have considered the medical condition of the petitioner's Authorised Representative and they should have provided sufficient time for filing their reply. However, without doing so, the impugned order came to be passed by the respondent, which is a clear violation of principles of natural justice. Therefore, this Court is inclined to grant an opportunity to the petitioner to present their case before the respondent. Accordingly, this Court directed as impugned order is set aside and the matter is remanded to the 1st respondent for fresh consideration.The petitioner shall file their reply/objection along with the required documents, if any, within a period of two weeks from the date of opening of portal by the respondent. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter are:Whether the impugned order passed by the respondent under the Income Tax Act, 1961, was in violation of the principles of natural justice due to non-consideration of the petitioner's medical condition and consequent non-grant of adequate opportunity to file a reply and appear for personal hearing;Whether the issuance of notices under Sections 142(1), 144, and 144B of the Income Tax Act, 1961, and the conduct of proceedings by the respondent complied with statutory requirements and principles of fairness;Whether the petitioner was afforded a reasonable opportunity to present their case before the passing of the impugned order;Whether the impugned order should be set aside and the matter remanded for fresh consideration in light of the petitioner's inability to respond due to medical reasons.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Compliance with Principles of Natural Justice in Passing the Impugned OrderRelevant Legal Framework and Precedents: The principles of natural justice require that a party affected by an adverse order must be given a fair opportunity to be heard before such order is passed. Section 142(1) of the Income Tax Act empowers the Assessing Officer to call for information or documents. Sections 144 and 144B empower the officer to assess income or pass orders in certain situations. The right to be heard includes the right to file a reply to show cause notices and to appear for personal hearing.Court's Interpretation and Reasoning: The Court observed that the petitioner's Authorised Representative was admitted to the hospital for gallbladder removal surgery during the period notices were issued and the date fixed for personal hearing. This medical condition was communicated to the Assessing Officer. Despite this, the respondent proceeded to pass the impugned order without granting adequate time or rescheduling the hearing.Key Evidence and Findings: The petitioner's medical condition was documented and brought to the respondent's notice. The petitioner sought time to file replies and to appear for hearing, which was not accommodated. The respondent issued multiple notices, but the petitioner could not respond in time due to the medical emergency.Application of Law to Facts: The Court held that the failure to consider the petitioner's medical condition and to provide sufficient opportunity to respond amounted to a breach of natural justice. The respondent's action of passing the order without hearing the petitioner violated the fundamental procedural fairness expected under the Act and judicial principles.Treatment of Competing Arguments: The respondent argued that notices were duly issued, and the petitioner failed to file replies or appear for hearing without sufficient cause. The Court found the petitioner's medical condition to be a reasonable and genuine cause, which the respondent ought to have considered before proceeding.Conclusions: The Court concluded that the impugned order was passed in violation of natural justice principles and was therefore liable to be set aside.Issue 2: Validity and Adequacy of Notices Issued Under Sections 142(1), 144, and 144B of the Income Tax ActRelevant Legal Framework and Precedents: Notices under Sections 142(1), 144, and 144B are procedural steps that require the taxpayer to respond or appear for hearings. The adequacy of these notices is judged by whether they afford the taxpayer a reasonable opportunity to comply and be heard.Court's Interpretation and Reasoning: The Court noted that the notices were issued in accordance with the statutory provisions. However, the mere issuance of notices does not fulfill the requirement of a fair hearing if the taxpayer is unable to respond due to genuine reasons and the authority does not accommodate such reasons.Key Evidence and Findings: The petitioner's repeated requests for time and medical emergency were not adequately considered. The respondent fixed a personal hearing date without ensuring the petitioner's availability.Application of Law to Facts: The Court emphasized that procedural compliance requires more than issuance of notices; it demands consideration of the taxpayer's circumstances and granting reasonable opportunity to respond.Treatment of Competing Arguments: The respondent relied on the fact of proper issuance of notices and non-appearance of the petitioner. The Court balanced this against the petitioner's communicated medical condition and found the respondent's approach lacking in fairness.Conclusions: The notices were validly issued but were insufficient to satisfy the principles of natural justice in the context of the petitioner's medical emergency.Issue 3: Remedial Relief and Directions for Fresh ConsiderationRelevant Legal Framework and Precedents: Courts have the power to set aside orders passed in breach of natural justice and remit the matter for fresh consideration with directions to ensure compliance with procedural fairness.Court's Interpretation and Reasoning: Given the violation of natural justice, the Court was inclined to grant an opportunity to the petitioner to present their case. The Court directed the respondent to reopen the portal for filing replies and to fix a fresh date for personal hearing with adequate notice.Key Evidence and Findings: The petitioner's inability to respond was due to a genuine medical condition, and the respondent had not provided sufficient opportunity prior to passing the order.Application of Law to Facts: The Court applied the principle that procedural fairness must be restored by setting aside the impugned order and remanding the matter for fresh adjudication.Treatment of Competing Arguments: The respondent's argument for finality was outweighed by the petitioner's right to be heard. The Court emphasized expeditious disposal upon fresh hearing.Conclusions: The Court set aside the impugned order dated 01.03.2025 and remanded the matter with clear directions for fresh consideration in accordance with law.3. SIGNIFICANT HOLDINGSThe Court held:'The impugned order came to be passed by the respondent, which is a clear violation of principles of natural justice.''The reason assigned, for non-filing of reply to the show cause notices issued by the respondent, appears to be genuine.''The respondent is supposed to have considered the medical condition of the petitioner's Authorised Representative and they should have provided sufficient time for filing their reply.'Core principles established include the imperative that authorities must accommodate genuine medical emergencies of taxpayers or their representatives before passing adverse