2025 (7) TMI 656 - AT - Income Tax

CIT(Appeals)/NFAC must provide section 153D approval copy and hearing opportunity before deciding appeals

ITAT Raipur held that CIT(Appeals)/NFAC violated principles of natural justice by not providing the assessee with a copy of approval under section 153D or ... Validity of approval granted u/s. 153D - violation of the principles of natural justice - assessee submitted that the CIT(Appeals)/NAFC while referring to the approval u/s.153D did not furnish any copy of the said approval to the assessee nor had provided any opportunity to the assessee to revert back after being appraised of regarding the said approval HELD THAT:- As evident that as submitted in the open court by the assessee and as conceded by the DR that the approval u/s.153D of the Act was not made available to the assessee nor any copy of the said approval was furnished to the assessee by the CIT(Appeals)/NFAC and without providing any opportunity to the assessee with regard to furnishing of submissions on the issue of approval, CIT(Appeals)/NFAC had decided the appeals of the assessee. There is gross violation of the principles of natural justice, wherein it is enshrined that all the quasi-judicial authority shall provide reasonable opportunity of hearing to the assessee before making any decision more particularly before imposing any liability on the assessee and the principles of natural justice provides for the fundamental basis in the judicial system and working therein so to establish equality and fair play in dispensing justice. In the present case as examined mandate of the principles of natural justice have not been complied with by the CIT(Appeals)/NFAC. Hon’ble Supreme Court has consistently emphasized the importance of adequate natural justice in the judicial and quasi-judicial proceedings. This principle ensures fairness, reasonableness and due process preventing arbitrary action and upholding fundamentality of the legal process. In the case of Maneka Gandhi Vs. Union of India [1978 (1) TMI 161 - SUPREME COURT] expanded the scope of natural justice holding that any action violating fairness, reasonableness and due process is arbitrary and unconstitutional. In the case of State of Orissa Vs. Dr. (Miss) Binapani Dei [1967 (2) TMI 96 - SUPREME COURT] the Hon’ble Apex Court has established that even administrative orders affecting a person’s rights must adhere to the principles of natural justice. There are certain principles ensuring within the parameters of natural justice, one of them is “audi alterm partem” which mandates that before taking any action against the party, they must be given an opportunity to be heard and present their case. We, thus remand the matters to the file of the Ld.CIT(Appeals)/NFAC with a direction to provide a copy of the approval u/s. 153D of the Act to the assessee and opportunity to the assessee for filing submissions /documentary evidence, if any and then should decide the appeals denovo as per law. Grounds of appeal raised by the assessee are allowed for statistical purposes. The core legal questions considered in the appeals revolve around the procedural compliance and adherence to principles of natural justice concerning the approval under section 153D of the Income Tax Act, 1961. Specifically, the issues include:Whether the approval under section 153D of the Act was duly communicated to the assessee during appellate proceedings.Whether the assessee was afforded an opportunity to be heard and to file submissions or evidence concerning the said approval.Whether the failure to provide a copy of the approval and an opportunity to the assessee amounts to a violation of the principles of natural justice.The implications of such a violation on the validity of the appellate orders passed by the Commissioner of Income Tax (Appeals)/NFAC.Issue-wise Detailed Analysis:1. Communication and Disclosure of Approval under Section 153D of the Income Tax ActThe legal framework mandates that any approval under section 153D, which authorizes the initiation or continuation of assessments or reassessments in cases involving search or seizure operations, must be communicated to the assessee. This ensures transparency and allows the assessee to effectively participate in the proceedings.The Court found that the Commissioner of Income Tax (Appeals)/NFAC did not furnish a copy of the approval under section 153D to the assessee nor informed the assessee about the approval during the appellate proceedings. The assessee remained unaware of the approval throughout the first appellate stage. The Revenue conceded this fact, acknowledging the absence of communication.The failure to provide the approval document or inform the assessee constitutes a procedural lapse. The Court emphasized that such non-disclosure deprived the assessee of the opportunity to understand the legal basis of the proceedings and to make informed submissions or produce relevant evidence.2. Opportunity to be Heard and Principles of Natural JusticeThe principles of natural justice, particularly the audi alteram partem rule, require that any person affected by a quasi-judicial decision must be given a reasonable opportunity to be heard before any adverse order is passed. This principle is fundamental to ensuring fairness, equality, and due process in legal proceedings.The Court relied on authoritative precedents, including the landmark ruling in Maneka Gandhi v. Union of India, which expanded the scope of natural justice to encompass fairness, reasonableness, and due process in administrative and judicial actions. Similarly, the State of Orissa v. Dr. (Miss) Binapani Dei affirmed that administrative orders affecting rights must comply with natural justice.Further, the Court referred to a recent Supreme Court decision involving a practicing advocate, where adverse remarks were struck down due to the absence of an opportunity to be heard, reinforcing the inviolability of the right to be heard in all judicial and quasi-judicial proceedings.In the present case, the absence of communication of the approval and denial of opportunity to the assessee to respond or submit evidence was held to be a gross violation of natural justice. The Court underscored that such procedural fairness is not merely a formality but a substantive right that underpins the legitimacy of the adjudicatory process.3. Impact of Violation on the Validity of the Appellate OrdersThe Court concluded that the failure to provide the approval under section 153D and the consequent denial of an opportunity to the assessee vitiated the appellate proceedings. Since the assessee was not apprised of a critical legal parameter affecting the assessment and penalty proceedings, the appellate orders passed by the CIT(Appeals)/NFAC could not stand.Accordingly, the Court remanded the matters back to the CIT(Appeals)/NFAC with clear directions to:Provide the assessee with a copy of the approval under section 153D of the Act.Afford the assessee a reasonable opportunity to file submissions and documentary evidence in response.Decide the appeals afresh in accordance with law, after considering the assessee's submissions.The Court's decision to remit the matter for de novo consideration reflects the fundamental importance of procedural fairness and the right to be heard in tax proceedings, especially where penalties and assessments are involved.Significant Holdings:The Court held: 'There is gross violation of the principles of natural justice, wherein it is enshrined that all the quasi-judicial authority shall provide reasonable opportunity of hearing to the assessee before making any decision more particularly before imposing any liability on the assessee and the principles of natural justice provides for the fundamental basis in the judicial system and working therein so to establish equality and fair play in dispensing justice.'Further, the Court reiterated the binding nature of natural justice principles as expounded in Maneka Gandhi and other precedents, emphasizing that any action violating fairness, reasonableness, and due process is arbitrary and unconstitutional.In directing the remand, the Court stated: 'We remand the matters to the file of the Ld.CIT(Appeals)/NFAC with a direction to provide a copy of the approval u/s. 153D of the Act to the assessee and opportunity to the assessee for filing submissions /documentary evidence, if any and then should decide the appeals denovo as per law.'On the basis of these findings, the appeals were allowed for statistical purposes, underscoring that the substantive issues remain open for fresh adjudication after compliance with natural justice.