Kerala HC: Rulling Taxpayer is Mandatory to Have a Personal Hearing If an Inquiry is Being Conducted U/S 148A(b)

Kerala HC's Order for Vazhakkulam Block Rural Co-operative Society LTD

Affording a personal hearing to the taxpayer is mandatory in an inquiry u/s 148A(b) of the Income Tax Act the Kerala High Court ruled.

The bench of Justice A.K. Jayasankaran Nambiar and Justice Kauser Edappagath laid on the division bench of the decision in the matter of Income Tax Officer v. Asamannoor Service Co-operative Bank Limited, in which it was ruled that the express provisions of Section 148A of the Income Tax Act reflect that the taxpayer must be given a chance of being heard, and the question deriving in the appeal is only whether that chance to be effective should include a privilege to a personal hearing as well.

The appellant/department has contested the judgment passed by the single judge in W.P. (C) No. 13727 of 2023. In the writ petition, the challenge of the writ petitioner was to the order passed by the Income Tax Officer Ward-2, Aluva, concerning Section 148A(d) of the Income Tax Act and the resulting notice issued to the writ applicant via the Officer under Section 148 of the Income Tax Act offering a re-assessment of the income for the AY 2019-20.

The respondent or taxpayer argued that the council proceeded to pass an order without allowing the petitioner to be heard as mandated u/s 148A(b) of the Income Tax Act. It was argued that the order was vitiated based on non-compliance with the rules of natural justice, and therefore, notice also was vitiated in law.

The Single Judge discovered that since Section 148A considered the provision of a chance to be heard for the taxpayer, the impugned orders and consequential notices were vitiated by the non-providing of a personal hearing to the taxpayer.

Hence the order and notice were quashed, and the writ applicant was asked to appear before the department with all the related documents in its possession for hearing. The court mentioned that when the applicant does not appear dated 12.12.2023 then no additional chance is required to be allotted to it by the income tax officer.

Only to a limited extent, the department is dissatisfied wherein the single judge said that a personal hearing is mandatory in an inquiry u/s 148A(b).

The department furnished that, acknowledging the nature of the proceedings, the scheme of the statute, and the language of the provisions, the taxpayer is not directed to be provided a chance of a personal hearing before passing an order u/s 148A(d).

The issue was whether affording a personal hearing to the taxpayer is mandatory in an inquiry u/s 148A(b) of the Income Tax Act.

While dismissing the plea of the department the court ruled that Section 148A of the Income Tax Act considers that the taxpayer must be provided a chance for a hearing and that chance should comprise the right to a personal hearing.