Order based on information not furnished to assessee for explanation is against principles of natural justice

Shameer Razaik Vs PCIT (Karnataka High Court)

Karnataka High Court held that passing of order on information procured from Stock Exchange and banks without furnishing the information to petitioner for their explanation is violative of principles of natural justice and hence set aside.

Facts- The petitioner has filed the present writ petition under Articles 226 and 227 of the Constitution of India praying to quash orders under Section 264 of the Income Tax Act, 1961. It is argued that the respondents refer to certain information procured from the Stock Exchange and Banks which had not been furnished to the petitioner for his explanation thereby violating the principles of natural justice.

Conclusion- Held that reliance is placed by respondent No.1 on certain information said to have been procured/prescribed from the Stock Exchange and Banks. In this regard, the material on record would indicate that there is nothing to show that the said information had been furnished to the petitioner for the purpose of enabling him to have his say/explanation and as such impugned order is violative the principles of natural justice and the same deserves to be set-aside.

Held that the material on record demonstrates that the petitioner had made investment and availed the benefit of Income Declaration Scheme under Section 183 of the Finance Act, 2016, which would have an impact on the claim of the petitioner and the said aspect having not been considered by the respondent, is yet another circumstance that would vitiate the impugned order, which deserves to be set-aside and the matter remitted back for reconsideration afresh in accordance with law.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

In this petition, the petitioner seeks the following reliefs:

“(A) Quash by an appropriate writ or order in the nature of Certiorari or otherwise, the order under section 264 dated 20.11.2023, to the extent prejudicial to the Petitioner as per pleadings, passed by the 1^st Respondent for the AY 2013-14 bearing F. No. 31/264/Pr.CIT-PNJ/2023-24 enclosed as Annexure-A.

(B) Quash by an appropriate writ or order in the nature of Certiorari or otherwise, the order under section 264 dated 20.11.2023, to the extent prejudicial to the Petitioner as per pleadings, passed by the 1^st Respondent for the AY 2014-15 bearing F. No. 32/264/Pr.CIT-PNJ/2023-24 enclosed as Annexure-B.

(C) Quash by an appropriate writ or order in the nature of Certiorari or otherwise, the order under section 264 dated 20.11.2023, to the extent prejudicial to the Petitioner as per pleadings, passed by the 1^st Respondent for the AY 2015-16 bearing F. No. 33/264/Pr.CIt-PNJ/2023-24 enclosed as Annexure-C;

(D) Quash as far as the Petitioner is concerned by an appropriate writ or order in the nature of Certiorari or otherwise, the order dated 28.12.2023 passed by the 2^nd Respondent for the AY 2013-14 bearing F. No. DCIT/Cir-1(1)&TPS/MNG/2023-24 enclosed as Annexure-D;

(E)      Grant such other reliefs as this Honorable High Court may think fit including the costs of this writ petition.”

2. Heard learned Senior Counsel for the petitioner and learned counsel for the respondent and perused the material on record.

3. In addition to reiterating various contentions urged in the present petitioner and referring to the material on record, learned Senior Counsel invited my attention to the impugned order passed under Section 264 of the Income Tax Act, 1961, whereby the revision petition filed by the petitioner was partly rejected by the respondent. In this context, it is pointed out that though impugned order purports to have been dated 20.11.2023, the same had not left the control and custody of the respondents up to 29.11.2023 and consequently, it was incumbent upon the respondents to consider the written submissions filed by the petitioner on 23.11.2023 and on this ground alone, the impugned order deserves to be set-aside and the matter to be remitted back to the respondents for reconsideration afresh, in accordance with law. In support of his submissions, learned Senior Counsel made the following submissions:

• Firstly, on 14.11.2023, the petitioner filed additional written submissions for A.Y.2013-14 to 2015-16, which have also not been considered fully and in the proper perspective, which would vitiate the impugned order;
• Secondly, it is pointed out that in the impugned order, respondent No.1 refers to certain information said to have been procured from the Stock Exchange and Banks in relation to the petitioner, which had not been furnished to the petitioner for his explanation/say thereby violating the principles of natural justice and as such the impugned order deserves to be set-aside on this ground also and the matter to be remitted back to the respondents for reconsideration afresh in accordance with law.
• Lastly, it is submitted that the petitioner had declared certain income under Income Declaration Scheme of the year 2016, which would have a bearing on the claim of the petitioner and non-consideration of the same would also require the impugned order to be set aside and remitted back to the respondent No.1 for reconsideration afresh in accordance with law.

4. It is submitted that the impugned order partially rejects the claim of the petitioner and as such the same may be set aside to the limited extent of rejecting claim of the petitioner and impugned order in so far as upholding claim of the petitioner may be confirmed.

5. Per contra, learned counsel for the respondents would support the impugned order and submits that there is no merit in the present petition and the same is liable to be dismissed.

6. As rightly contended by the learned Senior Counsel, a perusal of the postal cover produced at Annexure-E would indicate that though the impugned order is purported to have been passed on 20.11.2023, but the impugned order is seen to have been dispatched only on 29.11.2023, subsequent to the written submissions filed by the petitioner. In view of this ambiguity and discrepancy that is apparent on the face of the record, as regards the purported date of the impugned order and date of dispatch by the respondent No.1, I am of the view that the matter is required to be reconsidered afresh by considering written submissions filed by the petitioner on 23.11.2023. In any event, a perusal of the written submissions dated 23.11.2023 filed by the petitioner would also indicate that the same are relevant and necessary for the purpose of adjudication of the issues involved in the petition and since the same would have bearing/impact on the claim of the petitioner, the impugned order deserves to be set-aside.

7. A perusal of the impugned order will also indicate that reliance is placed by respondent No.1 on certain information said to have been procured/prescribed from the Stock Exchange and Banks. In this regard, the material on record would indicate that there is nothing to show that the said information had been furnished to the petitioner for the purpose of enabling him to have his say/explanation and as such impugned order is violative the principles of natural justice and the same deserves to be set-aside.

8. Learned Senior Counsel is also correct in his submission that the material on record demonstrates that the petitioner had made investment and availed the benefit of Income Declaration Scheme under Section 183 of the Finance Act, 2016, which would have an impact on the claim of the petitioner and the said aspect having not been considered by the respondent, is yet another circumstance that would vitiate the impugned order, which deserves to be set-aside and the matter remitted back for reconsideration afresh in accordance with law. So also, the additional written submissions filed on 14.11.2023 having not been considered fully and in the proper perspective, I am of the view that one more opportunity is to be granted to the petitioner to put forth all these contentions before respondent No.1, who is to be directed to reconsider the matter afresh in accordance with law.

8. In the result, I pass the following:

ORDER  

(i) Petition is hereby allowed;

(ii) Impugned orders dated 20.11.2023 at Annexures-A, B and C in so far as it relates rejecting the claim of the petitioner are hereby set-aside. Consequently, order dated 28.12.2023 at Annexure-D is also hereby quashed;

(iii) Impugned order in so far as it relates to upholding the claim of the petitioner is hereby confirmed.

(iv) The matter is remitted back to respondent No.1 for reconsideration afresh only to the limited extent of rejection of the claim of the petitioner, bearing in mind the observations made in this order; and

(v) Liberty is reserved in favour of the petitioner to produce additional pleadings, documents, etc., before respondent No.1, who shall consider the same and proceed further in accordance with law.