Case Law Details
Erode District Tractor Owners Association Vs PCIT (Madras High Court)
Order passed without hearing the petitioner in the application filed by the petitioner under Section 264 of the Income Tax Act, 1961 is set aside
In a recent legal development, the Madras High Court addressed an order issued under Section 264 of the Income Tax Act, 1961. The case, titled Erode District Tractor Owners Association Vs PCIT, revolves around a revision application submitted by the petitioner and highlights the fundamental aspect of hearing the petitioner before passing such orders.
Background of the Case: The petitioner, Erode District Tractor Owners Association, has challenged an order issued by the first respondent, the Principal Chief Income Tax Commissioner (PCIT), under Section 264 of the Income Tax Act, 1961. The order in question stems from a revision application filed by the petitioner under the same section.
Lack of Hearing: The primary contention in the challenge against the impugned order is that the petitioner was not granted an opportunity to be heard before the order was issued. The principle of natural justice, which includes the right to be heard, is a fundamental aspect of legal proceedings. The petitioner argues that this fundamental principle was not adhered to in this case.
Status and Taxation Issue: The petitioner, a society registered under the Tamil Nadu Societies Registration Act, 1975, faced a tax issue concerning its status declaration in the income tax return. Due to a mistake made during the filing of the return, the petitioner’s status was declared as “Association of Person (AOP)/Body of Individual (BOI).” Consequently, the petitioner was taxed at a rate of 30% instead of the applicable 10% for societies registered under the Tamil Nadu Societies Registration Act, 1975.
Inadequate Application of Mind: The court, upon considering the arguments presented by both the petitioner’s counsel and the learned Senior Standing Counsel for the respondents, observed that the impugned order appeared to suffer from a lack of adequate application of mind. The first respondent merely affirmed the views expressed in reports by the 2nd and 3rd respondents, without independent examination. Furthermore, the order was passed without giving the petitioner an opportunity to present their case.
Order Set Aside: In light of the above observations, the Madras High Court set aside the impugned order. The case was remitted back to the respondents for the issuance of a fresh order, this time ensuring a thorough consideration of merits and compliance with the law. The court also directed that the respondents should await the disposal of the application filed under Section 154 of the Income Tax Act, 1961, by the petitioner before the Jurisdictional Assessing Officer. This application must be disposed of within six weeks from the receipt of the court’s order. Additionally, the petitioner should be heard before the final orders are passed.
Conclusion: The judgment in the case of Erode District Tractor Owners Association Vs PCIT underscores the importance of adhering to the principles of natural justice, particularly the right to be heard, in legal proceedings. It serves as a reminder of the need for thorough and reasoned decision-making by tax authorities and the right of taxpayers to present their cases. The case also illustrates the court’s commitment to ensuring that due process is followed in matters related to taxation.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Mr. R. S. Balaji, learned Senior Standing Counsel takes notice on behalf of the respondents.
2. The petitioner has challenged the impugned order passed by the first respondent herein under Section 264 of the Income Tax Act, 1961. The aforesaid order has been passed by the first respondent in a revision application filed by the petitioner under Section 264 of the Income Tax Act. The impugned order is challenged primarily on the ground that the petitioner was not heard before the impugned order was passed.
3. That apart, the learned counsel for the petitioner submits that the petitioner is a society registered under the provisions of the Tamil Nadu Societies Registration Act, 1975. It is submitted that while filing the return, the petitioner had by made mistake given the status of the petitioner as of Association of Person(AOP)/Body of Individual(BOI). As a result of which, the petitioner has been taxed at 30% instead of 10% as applicable in the case of Societies registered under the provisions of the Tamil Nadu Societies Registration Act, 1975.
4.It is submitted that the impugned order has been passed without furnishing copies of report dated 20.02.2023 of the second respondent and report dated 23.02.2023 of the third respondent and without an opportunity of being heard.
5. I have considered the arguments advanced by the learned counsel for the petitioner and the learned Senior Standing Counsel for the respondents.
6. Prima facie, it appears that the impugned order suffers non application of mind in as much as the first respondent has merely confirms the view expressed by the 2nd respondent/Assistant Commissioner in his report dated 20.02.2023 and views expressed by the 3rd respondent in his report dated 23.02.2023. That apart, the impugned order has been passed without hearing the petitioner in the application filed by the petitioner under Section 264 of the Income Tax Act, 1961.
7. Considering the above, the impugned order is set aside and the case is remitted back to the respondents to pass a fresh order on merits and in accordance with law. The petitioner has also filed an application filed under Section 154 of the Income Tax Act, 1961. The respondents shall therefore await for the disposal of application filed under Section 154 of the Income Tax Act, 1961 filed by the petitioner before the Jurisdictional Assessing Officer. The Jurisdictional Assessing Officer shall dispose the application filed under Section 154 of the Income Tax Act, 1961, by the petitioner within a period of six weeks from the date of receipt of a copy of this order. Thereafter, the first respondent may pass appropriate orders after the order is passed by the Jurisdictional Assessing Officer and considering the same.
8. Needless to state, before passing orders, the petitioner shall also be heard.
9. This writ petition stands allowed with the above observations.
No costs. Consequently, connected writ miscellaneous petitions are closed.
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