Case Law Details
Bahuleyan Nair Vs DCIT (Kerala High Court)
The Kerala High Court has delivered a significant judgment in the case of Bahuleyan Nair vs. DCIT, concerning the issuance of a notice and order under Section 148A of the Income Tax Act, 1961. The petitioner, a Non-Resident Indian (NRI) conducting business in Sharjah (UAE), challenged the legality of Ext. P3 Order and Ext. P4 Notice, primarily on the grounds that the petitioner was not afforded a reasonable opportunity to be heard.
Background
The petitioner received a notice dated 07.03.2023 under Section 148A (b) of the Income Tax Act. This notice required the petitioner to explain why, given the annexure enclosed with the notice, a notice under Section 148 of the Income Tax Act should not be issued. The petitioner responded to this notice, raising various objections, including the contention that the show cause notice was not maintainable as per Section 149 of the Income Tax Act. Section 149 specifies that a notice can only be issued if entries in the books of accounts that have escaped assessment exceed Rs. 50,00,000/- (Rupees Fifty Lakhs only).
However, the petitioner was not given the opportunity for an in-person hearing, and without considering the petitioner’s reply, Ext. P3 Order and Ext. P4 Notice were issued. Section 148A (b) of the Income Tax Act expressly provides for the opportunity of being heard through the service of a notice to the assessee. The absence of such an opportunity rendered the issued order and notice unsustainable.
Kerala High Court’s Decision
The Kerala High Court, in its judgment, upheld the petitioner’s contentions and ruled in favor of Bahuleyan Nair. It found that the impugned order (Ext.P3) and notice (Ext.P4) were issued without providing the petitioner with a reasonable opportunity to be heard, which is a violation of Section 148A (b) of the Income Tax Act.
Consequently, the High Court allowed the present petition and set aside Ext.P3 Order and Ext.P4 Notice. The matter was remanded back to the respondents with a directive to pass a fresh order, ensuring that the petitioner is given a proper opportunity to be heard in accordance with the law.
Conclusion
The Kerala High Court’s judgment in the case of Bahuleyan Nair vs. DCIT serves as an important reminder of the principles of natural justice and due process. It reaffirms the right of taxpayers to be heard before any adverse order is issued against them under the Income Tax Act. This ruling underscores the significance of adhering to procedural fairness in tax matters and provides clarity on the necessity of granting individuals the opportunity to present their case before any adverse actions are taken by tax authorities.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
1. Heard Smt. Nikitha Susan Paulson, Learned Counsel for the petitioner and Sri. Jose Joseph, Learned Standing Counsel for Income Tax Department.
2. The Writ Petition is challenging Ext. P3 Order and Ext. P4 Notice on the ground that Ext.P3 Order was passed as per Section 148A (d) of the Income Tax Act, 1961 without providing the petitioner an opportunity of being heard.
3. The petitioner is a Non – Resident Indian (NRI). The claim of the petitioner is that the petitioner is carrying out business in Sharjah (UAE).
4. The petitioner was received a notice dated 07.03.2023 under Section 148A (b) of the Income Tax Act requiring him to show cause as to why, in view of the annexure enclosed with the notice, a notice under Section 148 of the Income Tax Act should not be issued.
5. The petitioner filed reply to the said notice taking various ground that the Show Cause notice was not maintainable as Section 149 of the Income Tax Act specifically provided that unless entries in the books of accounts which has escaped assessment is more than Rs.50,00,000/- (Rupees Fifty Lakhs only), no notice can be issued for an assessment year. The petitioner was not provided any facility of being heard in person and no consideration of the reply, the impugned order Ext. P3 and Ext. P4 Notice was passed. Section 148 A (b) of the Income Tax Act especially provides the opportunity of being heard to the assessee by serving him with a notice. There is no opportunity of being heard provided to the petitioner, issued Ext.P3 Order and thereafter Ext.P4 Notice which are unsustainable.
6. The present petition is allowed. The impugned order Ext.P3 and Ext.P4 Notice are set aside. The matter is remanded back to the respondents to pass a fresh order, after giving an opportunity of being heard to the petitioner.
7. With the aforesaid directions, the writ petition is allowed.
