Case Law Details
Johnson Koomullil Thomas Vs ITO (Kerala High Court)
In a significant ruling, the Kerala High Court addressed procedural fairness in tax assessments under Section 148A of the Income Tax Act, 1961. The case of Johnson Koomullil Thomas vs Income Tax Officer (ITO) highlights the importance of adherence to principles of natural justice in administrative proceedings.
The petitioner, Johnson Koomullil Thomas, challenged the validity of Ext.P6 order issued by the Assessing Officer (AO) under Section 148A(b) of the Act. This section mandates that before initiating proceedings for escaped income assessment, the AO must afford the taxpayer an opportunity to respond to a show-cause notice.
The crux of the petitioner’s argument was that Ext.P6 and the subsequent Ext.P7 notice were issued by an AO who did not conduct the initial hearing. This procedural discrepancy raised concerns about the application of the “he who decides must hear” principle, a cornerstone of natural justice.
Section 148A of the Act explicitly requires the AO to conduct necessary inquiries, if any, and decide on the basis of material available whether to issue a notice under Section 148. The court acknowledged that failing to adhere to these procedural safeguards could undermine the fairness of the assessment process.
During the proceedings, the respondent, represented by the Standing Counsel, conceded that Ext.P6 was indeed issued by an AO who did not conduct the hearing. This admission bolstered the petitioner’s contention that Ext.P6 and Ext.P7 were invalid due to procedural irregularities.
In its deliberation, the Kerala High Court reaffirmed the principle that administrative authorities, especially in matters affecting legal rights like taxation, must observe procedural fairness. The failure of the AO to follow the prescribed procedure under Section 148A constituted a violation of natural justice.
Consequently, the Kerala High Court set aside Ext.P6 and Ext.P7, directing the Assessing Officer to re-examine the case in accordance with the law. The judgment underscores the judiciary’s role in upholding the rule of law and ensuring that administrative actions adhere to procedural norms.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner has filed this writ petition challenging Ext.P6 order passed by the respondent Assessing Officer under Section 148A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act,’ for short).
2. The Assessing Officer issued Ext.P3 show cause notice under Clause (b) of Section 148A of the Act to the petitioner stating that the income chargeable to tax for the assessment year 2017-18 has escaped assessment and why a notice under Section 148 of the Act should not be issued. The petitioner submitted Ext.P4 reply. The petitioner was given an opportunity of hearing. The petitioner was later served with Ext.P6 proceedings under Clause (d) of Section 148A of the Act asking the petitioner to file his return for the said year. The petitioner was also issued with Ext.P7 notice under Section 148 of the Act. The petitioner submits that Exts.P6 and P7 orders have been issued without jurisdiction as the impugned orders are not passed by the person who heard the petitioner. The petitioner also submits that the threshold of Rs. 50 lakhs has not been attained so as to invoke the extended period of limitation under Section 149 of the Act.
3. Section 148A provides that the Assessing Officer shall, before issuing any notice under section 148, conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order. Opportunity of being heard to the assessee is explicit in the Section itself. The petitioner contends that Ext.P6 order been passed in violation of the principle ‘he who decides must hear’.
4. Heard Sri. Anil D. Nair, the learned senior counsel for the petitioner and Sri. Cyriac Tom, the learned Standing Counsel for the respondent.
5. Sri. Cyriac fairly submits that Ext.P6 order has been passed by the Assessing Officer who did not hear the petitioner.
6. The doctrine ‘he who heard must decide / he who decides must hear’ applies to statutory authorities. Section 148A of the Act provides for opportunity of being heard to the assessee. If the officer who hears does not render the decision, it would amount to violation of the principles of natural justice. Since Ext.P6 order is not passed by the Officer who heard the petitioner, Ext.P6 order is set aside. Consequently Ext.P7 notice under Section 148 is also set aside. The Assessing Officer shall pass fresh orders pursuant to Ext.P3 show cause notice after affording an opportunity of hearing to the petitioner, as expeditiously as possible.
The writ petition is disposed of as above.
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