2025 (7) TMI 656 - AT - Income Tax

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

Tulika Kedia Versus The Assistant Commissioner of Income Tax, Central Circle-1, Raipur (C.G.)

Tulika Kedia Versus The Assistant Commissioner of Income Tax, Central Circle-1, Raipur (C.G.) - TMI 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.