Natural justice in tax proceedings: transfer and revision orders set aside for undue haste and unfair hearing.
Transfer of an assessee's file under Section 127 and revision under Section 263 were found unsustainable where the proceedings were completed in undue haste during the COVID period and without a fair, reasonable opportunity of hearing. The record showed issuance of show cause notices and objections, but the inconsistent hearing dates, short time span, and pandemic restrictions indicated breach of natural justice. Both orders were set aside, while the authorities were left free to initiate fresh proceedings in accordance with law.
Issues: (i) Whether the transfer of the assessee's file under Section 127 of the Income-tax Act, 1961 was validly made after affording a fair opportunity of hearing and recording reasons; (ii) Whether the revisional order under Section 263 of the Income-tax Act, 1961 was sustainable in the facts of the case, including the timing and manner of completion of proceedings during the COVID period.
Issue (i): Whether the transfer of the assessee's file under Section 127 of the Income-tax Act, 1961 was validly made after affording a fair opportunity of hearing and recording reasons.
Analysis: The record showed that a show cause notice was issued and objections were filed, but the proceedings were carried through in a hurried manner during the peak COVID period. The Bench found no satisfactory explanation for the course adopted and treated the transfer proceedings as having been concluded without a fair and reasonable opportunity in the circumstances.
Conclusion: The transfer order under Section 127 of the Income-tax Act, 1961 was held unsustainable and was set aside.
Issue (ii): Whether the revisional order under Section 263 of the Income-tax Act, 1961 was sustainable in the facts of the case, including the timing and manner of completion of proceedings during the COVID period.
Analysis: The Bench noted the issuance of multiple show cause notices with inconsistent hearing dates, the short span in which the revision was finalised, and the restrictions prevailing during the pandemic. It held that the revision had been concluded in undue haste and without affording a fair and reasonable opportunity of defence, amounting to breach of natural justice.
Conclusion: The revisional order under Section 263 of the Income-tax Act, 1961 was held unsustainable and was set aside.
Final Conclusion: The assessee succeeded in challenging both the transfer and revisional orders, and the Court left it open to the authorities to commence fresh proceedings in accordance with law.
Ratio Decidendi: Administrative tax orders affecting jurisdiction or revision must be preceded by a fair and reasonable opportunity of hearing and cannot be sustained when concluded in undue haste in circumstances showing denial of natural justice.
TaxTMI 
AI Drafter ✕
TaxTMI 
