Facts of the Case

The petitioners, Gurupreet Sangla and Seema Sangla, challenged proceedings initiated by the Income Tax Department for Assessment Year 2016–17.

The Assessing Officer (AO) passed orders under Section 148A(d) of the Income Tax Act, 1961, followed by issuance of notices under Section 148, without granting the petitioners a personal hearing, despite specific requests made in their replies dated 06.06.2022.

Further, even after an interim order of the Court (dated 10.05.2023) restraining coercive action, the AO proceeded to:

  • Pass the assessment order
  • Issue demand notices

This led to the filing of writ petitions before the High Court.

Issues Involved

  1. Whether failure to grant personal hearing under Section 148A(d) violates principles of natural justice.
  2. Whether the AO could proceed with assessment despite a court’s interim protection order.
  3. Validity of reassessment proceedings initiated without proper opportunity of being heard.

Petitioner’s Arguments

  • The petitioners contended that:
    • They had submitted detailed replies addressing both facts and law.
    • They explicitly requested a personal hearing, which was not granted.
    • The AO’s action violated principles of natural justice.
    • The subsequent assessment and demand notices were illegal and arbitrary, especially in light of the Court’s interim protection.

Respondent’s Arguments

  • The Revenue, represented by senior standing counsel, fairly submitted that:
    • Considering the grievance regarding lack of hearing,
    • The appropriate course would be to set aside the impugned orders passed under Section 148A(d) and the consequent notices under Section 148.

Court’s Findings / Order

The Court held:

  • Orders dated 29.07.2022 and 30.07.2022 under Section 148A(d), along with consequential notices under Section 148, were set aside.
  • As a consequence:
    • The assessment order automatically collapsed.
  • Liberty was granted to the AO to:
    • Pass a fresh order under Section 148A(d)
    • After granting proper personal hearing to the petitioners
  • The AO must:
    • Issue notice specifying date and time of hearing

The writ petitions were disposed of accordingly.

Important Clarification by Court

  • Personal hearing is a crucial component of Section 148A proceedings where requested.
  • Any reassessment action without affording such opportunity is liable to be quashed.
  • Administrative authorities must strictly adhere to natural justice principles, especially in reassessment proceedings.

Sections Involved

  • Section 148A(d), Income Tax Act, 1961
  • Section 148, Income Tax Act, 1961

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS11072023CW60612023_114915.pdf

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