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Case Law Details

Case Name : Wadakkancherry Service Vs ITO (Kerala High Court)
Appeal Number : WA No. 382 of 2024
Date of Judgement/Order : 18/03/2024
Related Assessment Year : 2019-20

Wadakkancherry Service Vs ITO (Kerala High Court)

Introduction: The Kerala High Court recently rendered a significant verdict in the case of Wadakkancherry Service against the Income Tax Officer (ITO). The court’s decision overturned an assessment order due to a breach of natural justice. Let’s delve into the details of this crucial judgment.

Detailed Analysis: The appellant, a Co-operative Society, faced scrutiny for its income tax return of the assessment year 2020-21. Despite timely submission of objections post the due date, the assessing authority proceeded with the assessment, ignoring the appellant’s pleas for a personal hearing via video conferencing. The appellant’s response, submitted after the deadline due to office closures during holidays, was disregarded, leading to an unjust assessment order.

The court found that while the appellant’s reply was delayed, it was submitted directly to the assessing authority and contained crucial objections and requests for a hearing. However, the assessing authority failed to consider this reply, thereby violating principles of natural justice.

In its verdict, the Kerala High Court emphasized the importance of adherence to natural justice principles in administrative proceedings. It set aside the assessment order and directed the assessing authority to reconsider the case, taking into account the appellant’s submissions and providing a fair opportunity for a personal hearing.

Conclusion: The judgment by the Kerala High Court in the Wadakkancherry Service vs. ITO case serves as a reminder of the significance of procedural fairness in administrative actions. By overturning the assessment order and emphasizing the right to a fair hearing, the court reaffirmed the importance of upholding principles of natural justice in tax assessments. This ruling stands as a beacon for ensuring fairness and equity in administrative proceedings.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The appellant is a Co-operative Society providing credit facilities to its members and is an assessee to income tax.

2. The appellant filed income tax return with respect to the assessment year 2020-21 relevant to the financial year 2019- 2020. The appellant’s case was selected for scrutiny through CASS under the complete scrutiny category, and Ext.P1 show cause notice was issued directing him to file objection before 9/9/2022. The appellant did not file reply on or before 9/9/2022 due to the fact that its office was closed on account of Onam holidays. According to the appellant, its office resumed functioning only on 12/9/2022, and by that time, the online functionality to file reply in the income tax portal had already closed. Therefore, the appellant filed Ext.P2, a reply to the 1st respondent/jurisdictional assessing authority, on 14/9/2022, pointing out the objections as well as requesting an opportunity for a personal hearing through video conferencing. However, the 2nd respondent completed the assessment and passed Ext.P3 assessment order, creating a demand for 60,68,335/-. The appellant challenged Ext.P3 order unsuccessfully before the learned Single Judge. It is challenging the judgment of the learned Single Judge; the appellant is before us.

3. We have heard Sri. Harisankar V. Menon, the learned counsel for the appellant and Sri. Jose Joseph, the learned Standing Counsel for the Income Tax Department.

4. Though the appellant was directed to file reply to P1 on or before 9/9/2022, it is not in dispute that it gave Ext.P2 reply to the 1st respondent on 14/9/2022. In Ext. P2 reply, the appellant has not only pointed out its objections to the facts stated in Ext.P1 but also requested an opportunity for a personal hearing through video conferencing. In Ext.P2, the appellant has given a detailed bifurcation of the miscellaneous income of `1,30,67,114/- and claimed for deduction under Section 80P of the Income Tax Act. It is true that the appellant could not file reply to Ext.P1 through online mode. But the fact remains that he gave reply directly to the 1st respondent on 14/9/2022. Ext.P3 order was passed on 23/9/2022. Even though the 1st respondent received Ext.P2 reply well in advance, he did not consider the same at all while passing Ext.P3 order. That apart, no opportunity for personal hearing as requested in Ext.P2 was given. In these circumstances, we are of the view that there is a clear violation of the principles of natural justice. Hence, the impugned judgment, as well as Ext.P3, are not sustainable, and we set aside the same. The 1st respondent is directed to redo the assessment taking into account the bifurcation of interest component shown in Ext.P2 reply and also giving an opportunity for personal hearing to the appellant. The 1st respondent shall, thereafter, pass a fresh assessment order within two months from the date of receipt of a copy of this judgment.

Writ appeal is disposed of as above.

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