Context and Background
The Allahabad High Court recently ruled on the necessity of providing a personal hearing to an assessee under Section 148A(d) of the Income Tax Act, 1961, particularly when specifically requested by the assessee. This decision arose from a petition filed by Gyan Prakash Rastogi, who, along with his brother, runs separate businesses but jointly owns a shop subjected to a search and seizure operation under the Income Tax Act. During this operation, several loose documents and sheets were seized, which later led to an audit objection against Rastogi. Subsequently, he received a notice under Section 148A(b) based on these audit objections.
Petitioner's Request and Subsequent Actions
In response to the notice, Rastogi explicitly requested a copy of the audit objection and an opportunity for a personal hearing. However, without providing the requested documents or the chance for a personal hearing, the authorities proceeded to pass an order under Section 148A(d). This was followed by another notice under Section 148. Rastogi, feeling aggrieved by the lack of procedural fairness, challenged both the order under Section 148A(d) and the subsequent notice under Section 148.
Legal Framework and Guidelines
Rastogi's counsel relied heavily on guidelines issued by the Central Board of Direct Taxes (CBDT) on August 1, 2022, which were later clarified on August 22, 2022. These guidelines mandated that a personal hearing should be provided in cases where a reassessment notice is issued and the assessee has requested one. The petitioner's counsel argued that the failure to adhere to these guidelines constituted a significant procedural lapse, warranting the quashing of the order and notice.
Respondent's Argument
The respondents, represented by their counsel, referred to the case of Vivek Saran Agarwal vs. Union of India, wherein the Allahabad High Court had previously held that a detailed hearing was not necessary at the stage of issuing a notice under Section 148A(b) and before passing an order under Section 148A(d). They contended that the procedural requirements had been sufficiently met and that the petitioner's request did not necessitate a personal hearing under the circumstances.
Court's Analysis and Judgment
Upon examining the case, the bench, comprising Justice Sangeeta Chandra and Justice Shree Prakash Singh, found that the petitioner had specifically requested the audit objection documents and a personal hearing in his reply to the notice under Section 148A(b). The court observed that the authorities acted in undue haste by passing the order under Section 148A(d) without fulfilling these requests. The judges emphasized that the CBDT's circular dated August 22, 2022, clearly mandated the provision of relevant documents and a personal hearing when requested by the assessee, underscoring the importance of procedural fairness.
The court remarked that the Assessing Officer had failed to comply with these guidelines, leading to a breach of the assessee's rights. It concluded that the authorities' actions were not in line with the prescribed procedures, thus invalidating the subsequent order and notice.
Conclusion and Implications
As a result, the court quashed the notice under Section 148 and the order under Section 148A(d) of the Income Tax Act, 1961, issued against Rastogi. This ruling reinforces the importance of adhering to procedural guidelines and the necessity of granting a personal hearing when explicitly requested by an assessee. It sets a precedent ensuring that tax authorities must observe due process and provide fair opportunities for assessees to present their case, particularly in matters of reassessment under the Income Tax Act.
This judgment serves as a significant reminder to tax authorities to uphold the principles of natural justice and procedural fairness, thereby safeguarding the rights of taxpayers. The decision also highlights the judiciary's role in overseeing administrative actions and ensuring compliance with established guidelines and legal standards.
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