M/S.MUGU SERVICE CO-OPERATIVE BANK LTD vs. THE INCOME TAX OFFICER

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WP(C)/36113/2022HC KeralaKLHC01077457202211 November 2022Author: HONOURABLE MR. JUSTICE GOPINATH P.4 pages
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What did the High Court hold?

The High Court held that both Ext.P4 (rectification order) and Ext.P7 (penalty order) were issued without affording the petitioner any opportunity to be heard. Consequently, the Court directed that any demands arising from these orders shall be kept in abeyance until the appeal is disposed of by the 3rd respondent. The 3rd respondent (National Faceless Appeal Centre) was directed to consider and pass orders on Ext.P5 appeal within six months of receiving a certified copy of the judgment, after providing the petitioner an opportunity of hearing. Until the appeal is decided, recovery proceedings for amounts due under Exts.P4 and P7 are to be kept in abeyance. The Court did not decide the merits of the rectification or penalty orders themselves, focusing on the procedural lapse.

What were the facts?

The petitioner, M/s. Mug Service Co-operative Bank Ltd., is challenging assessment orders for assessment year 2017-18. The original assessment was completed via Ext.P3 order. Subsequently, the assessing officer (1st respondent) issued a rectification order under Section 154 (Ext.P4) and a penalty order under Section 270A (Ext.P7). The petitioner contends that both Ext.P4 and Ext.P7 were passed without providing any opportunity to object. An appeal (Ext.P5) and stay petition (Ext.P6) were filed before the National Faceless Appeal Centre (3rd respondent). The petitioner apprehends recovery proceedings for the amounts demanded in Ext.P4 and Ext.P7 while the appeal is pending.

What were the issues?

1. Whether Ext.P4 order of rectification under Section 154 of the Income Tax Act, 1961, is illegal and unsustainable for being passed without affording the petitioner an opportunity to object? 2. Whether Ext.P7 order imposing penalty under Section 270A of the Income Tax Act, 1961, is illegal and arbitrary for being passed without affording the petitioner an opportunity to object? Assessee's Contentions: The petitioner argues that both the rectification order (Ext.P4) and the penalty order (Ext.P7) are illegal and unsustainable as they were passed without providing any opportunity for the petitioner to present their objections. The petitioner relies on the principle that principles of natural justice must be followed before passing adverse orders. Revenue's Contentions: The judgment does not record any specific contentions from the revenue.

Which sections of the Income-tax Act were involved?

Section 154,Section 270A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. FRIDAY, THE 11TH DAY OF NOVEMBER 2022 / 20TH KARTHIKA, 1944 WP(C) NO. 36113 OF 2022 PETITIONER: M/S.MUGU SERVICE CO-OPERATIVE BANK LTD., MUGU P.O.,KASARAGOD – 671 321, REPRESENTED BY ITS SECRETARY IN CHARGE, SMT. UMALATHA A. BY ADVS. ALAN PRIYADARSHI DEV V.P.NARAYANAN T.M.SREEDHARAN (SR.) RESPONDENTS: 1 THE INCOME TAX OFFICER, WARD 1 & TPS, AAYAKAR BHAVAN, VIDYA NAGAR, KASARAGOD – 671 123, KERALA STATE. 2 ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX OFFICER, NATIONAL FACELESS ASSESSMENT CENTRE, INCOME TAX DEPARTMENT, MINISTRY OF FINANCE, ROOM NO.401, 2ND FLOOR, E-RAMP, JAWAHARLAL STADIUM, DELHI – 110 003. 3 THE COMMISSIONER OF INCOME TAX (APPEALS), NATIONAL FACELESS APPEAL CENTRE, INCOME TAX DEPARTMENT, MINISTRY OF FINANCE,JAWAHARLAL STADIUM,DELHI – 110 003. ADV. CHRISTOPHER ABRAHAM (SC) THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 11.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 36113 OF 2022 2

JUDGMENT The assessment of the petitioner under the provisions of the Income Tax Act for the assessment year 2017-18 was originally completed by Ext.P3 order dated 27.03.2022. The assessing officer (the 1st respondent herein) thereafter issued Ext.P4 order rectifying the assessment in exercise of juri iction under Section 154 of the Income Tax Act, against which the petitioner has filed Ext.P5 appeal along with Ext.P6 stay petition before the National Faceless Appeal Centre (3rd respondent). Pending consideration of the stay petition, the 1st respondent has also issued an order imposing penalty under Section 270A of the Income Tax Act, 1961 through Ext.P7 order dated 23.09.2022. It is the case of the petitioner that Ext.P4 order of rectification is completely illegal and unsustainable as the rectification was made without affording to the petitioner any sort of opportunity to object. It is submitted that Ext.P7 order imposing penalty has also been issued without affording any opportunity to the petitioner. It is submitted that the orders are, therefore, illegal and arbitrary. The petitioner apprehends that recovery proceedings may be WP(C) NO. 36113 OF 2022 3 initiated to recover amounts due under Exts.P4 and P7 pending consideration of the appeal by the appellate authority.

2.

Having regard to the facts and circumstances of the case and taking into consideration of the submission of the learned counsel appearing for the petitioner that both Exts.P4 and P7 orders have been issued without affording to the petitioner any opportunity, I am of the opinion that the demands, if any, pursuant to Exts.P4 and P7 shall be kept in abeyance till the appeal is disposed of by the 3rd respondent. Accordingly, this writ petition is disposed of directing the 3rd respondent to consider and pass orders on Ext.P5 appeal after affording to the petitioner an opportunity of hearing, within a period of six months from the date of receipt of a certified copy of this judgment. Till such time as orders are passed, any proceedings for recovery of amounts due under Exts.P4 and P7 shall be kept in abeyance. GOPINATH P. JUDGE DK

WP(C) NO. 36113 OF 2022 4

Appendix — schedule of exhibits
APPENDIX OF WP(C) 36113/2022 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE 1ST RESPONDENT DATED 13.12.2019 FOR THE ASSESSMENT YEAR 2017-18 Exhibit P2 TRUE COPY OF THE ORDER OF ITAT COCHIN BENCH IN LTA NO.355/COCH/2020 DATED 21.10.2020. Exhibit P3 TRUE COPY OF THE ASSESSMENT ORDER PASSED BY THE 2ND RESPONDENT ALONG WITH DEMAND NOTICE DATED 27.03.2022. Exhibit P4 TRUE COPY OF THE RECTIFICATION ORDER PASSED BY THE 1ST RESPONDENT DATED 22.09.2022 Exhibit P5 TRUE COPY OF THE APPEAL MEMORANDUM SUBMITTED BEFORE THE 3RD RESPONDENT DATED 22.10.2022 Exhibit P6 TRUE COPY OF THE STAY PETITION DATED 13/10/2022 SUBMITTED BEFORE THE 3RD RESPONDENT Exhibit P7 TRUE COPY OF THE PENALTY ORDER ISSUED BY THE 1ST RESPONDENT DATED 23.09.2022

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