SRI S RAMU vs. THE INCOME TAX OFFICER

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WP/2945/2025HC KarnatakaKAHC01005771202511 February 2025Bench: S.G.PANDIT5 pages
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What did the High Court hold?

The High Court allowed the writ petition in part. The Court held that the order passed under Section 154 of the Income Tax Act, 1961, dated 25.11.2024 (Annexure-M), and the subsequent notice issued under Section 274 of the Income Tax Act, 1961, dated 20.12.2024 (Annexure-P), were liable to be quashed. The reasoning was based on the clear violation of Section 154(3) of the Act, which mandates that an opportunity of personal hearing must be afforded to the assessee when the Assessing Officer decides to increase the assessee's liability. The Court found that this procedural safeguard was not followed. Consequently, the matter was remitted back to the respondent No.4 (Authority) to reconsider the application filed under Section 154 of the Income Tax Act, 1961, and pass an appropriate order in accordance with the law, after providing the petitioner with an opportunity of hearing. The petitioner was directed to appear before the fourth respondent on 07.03.2025. All contentions of the parties were left open.

What were the facts?

The petitioner, Sri S Ramu, filed a writ petition before the High Court of Karnataka challenging an order passed under Section 154 of the Income Tax Act, 1961, dated 25.11.2024, and a notice issued under Section 274 read with Section 271F of the Income Tax Act, 1961, dated 20.12.2024. The petitioner contended that during the rectification proceedings under Section 154, the Assessing Officer enhanced the tax liability without affording an opportunity of personal hearing, which is a mandatory requirement when liability is increased. The petitioner argued that rectification should only address mistakes apparent from the record and not introduce new matters. The revenue's counsel was unable to confirm whether a personal hearing was granted but stated that the petitioner had an opportunity to file objections, which they did not avail.

What were the issues?

1. Whether the order passed under Section 154 of the Income Tax Act, 1961, is liable to be quashed for non-compliance with the requirement of affording a personal hearing to the assessee when the liability was enhanced. Assessee's contention: The petitioner argued that Section 154(3) of the Income Tax Act, 1961, mandates a personal hearing when the Assessing Officer proposes to increase the assessee's liability during rectification proceedings. The petitioner asserted that this opportunity was denied, rendering the order invalid. They further argued that rectification is limited to correcting apparent mistakes and cannot be used to introduce new issues or enhance liability without proper procedure. Revenue's contention: The revenue's counsel could not confirm whether a personal hearing was provided but submitted that the petitioner had an opportunity to file objections, which they failed to do.

Which sections of the Income-tax Act were involved?

Section 154,Section 274,Section 271F

AI-generated summary — verify with the full judgment below

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NC: 2025:KHC:6013 WP No. 2945 of 2025

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF FEBRUARY, 2025 BEFORE THE HON'BLE MR JUSTICE S.G.PANDIT WRIT PETITION NO. 2945 OF 2025 (T-IT) BETWEEN:

SRI S RAMU AGE 57 YEARS S/O LATE SIDDASETTY NO.331, A AND B BLOCK, NAVILU ROAD - I CROSS, KUVEMPUNAGAR, MYSORE-570 023. …PETITIONER (BY SRI. B.N. MAHESH CHANDRA, ADV. FOR SRI NAVEEN G. S., ADV.)

AND:

1.

THE INCOME TAX OFFICER WARD 1(1), REAC, MYSORE- 570008.

2.

THE INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE DELHI-110001.

3.

COMMISSIONER OF INCOME TAX (APPEALS) NATIONAL FACELESS APPEAL CENTRE DELHI-110001.

4.

THE INCOME TAX OFFICER WARD-2(4), AAYAKAR BHAVAN, #21/16, RESIDENCY ROAD, NAZARBAD, MYSORE – 570010. …RESPONDENTS (BY SRI.M THIRUMALESH, ADV. FOR R1 TO R4)

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2025:KHC:6013 WP No. 2945 of 2025

THIS PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PRYING TO QUASH THE ORDER UNDER SECTION 154 OF INCOME TAX ACT, 1961 DATED 25.11.2024 BEARING NO.154/JAO/ITO/W-2(4)/MYS/2024-25 PASSED BY THE 4TH RESPONDENT AND PRODUCED AT ANNEXURE-M; QUASH THE NOTICE UNDER SECTION 274 READ WITH 271F OF INCOME TAX ACT, 1961 DATED 20.12.2024 BEARING NO. ITBA/PNL/S/271(F)/2024-25/ 1071405861(1) PASSED BY THE 4TH RESPONDENT AND PRODUCED AT ANNEXURE-P AND ETC.

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.G.PANDIT

ORAL ORDER

Heard learned counsel Sri.B.N.Mahesh Chandra, for Sri.Naveen.G.S., learned counsel for petitioner and learned counsel Sri.M.Thirumalesh for respondents. Perused the writ petition papers.

2.

Learned counsel for the petitioner would submit that the petitioner/assessee is before this Court questioning the order passed under Section 154 of the Income Tax Act, 1961 (for short, ‘1961 Act’) along with notice issued under Section 274 dated 20.12.2024 (Annexure-P) and also assessment order dated 31.03.2022 and computation sheet dated 31.03.2022.

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NC: 2025:KHC:6013 WP No. 2945 of 2025

Learned counsel for the petitioner would submit that the application under Section 154 of 1961 Act was filed and while passing the order, the Jurisdictional Assessing Officer has enhanced the liability. Further, referring to Section 154 of 1961 Act, learned counsel for the petitioner would submit that the petitioner was not afforded an opportunity of personal hearing when the Assessing Authority has increased the liability. Moreover, he submits that rectification is permissible to the extent of mistake apparent on the face of the record. The rectification cannot be for a matter which is not contained in the order. Thus, learned counsel would pray for setting aside the order passed under Section 154 of 1961 Act and prays for an opportunity of hearing before the Authority.

3.

Learned counsel Sri.M.Thirumalesh on the other hand is not in a position to submit as to whether the petitioner was given an opportunity of hearing while passing order under Section 154 of 1961 Act, but he

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NC: 2025:KHC:6013 WP No. 2945 of 2025

submits that the petitioner was given opportunity to file objections, which the petitioner has not filed.

4.

Having heard the learned counsel appearing for the parties and on perusal of the order passed under Section 154 of 1961 Act, it is apparent that the petitioner was not afforded an opportunity of personal hearing in terms of Section 154(3) of 1961 Act when the Jurisdictional Assessing Officer has increased the liability of the assessee. In terms of Section 154(3) of 1961 Act, the petitioner would be entitled for personal hearing when the Assessing Officer decides to increase the liability. In that view of the matter, impugned order passed under Section 154 of 1961 Act needs interference. It is open for the petitioner to raise all contentions before the respondent No.4-Authority. Hence, the following: ORDER

a) Writ petition is allowed in part.

b) Annexure-M bearing No.154/JAO/ITO/W- 2(4)/MYS/2024-25 dated 25.11.2024, order

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NC: 2025:KHC:6013 WP No. 2945 of 2025

passed under Section 154 of 1961 Act is quashed and also subsequent notice issued under Section 274 of 1961 Act dated 20.12.2024 bearing No.ITBA/PNL/S/271(F)/ 2024-25/1071405861(1) (Annexure-P) are quashed.

c) The matter is remitted back to respondent No.4 to consider application filed under Section 154 of 1961 Act and pass appropriate order in accordance with law, after affording opportunity of hearing to the petitioner.

d) Petitioner is directed to appear before the fourth respondent on 07.03.2025.

e) All contentions of the parties are left open.

Sd/- (S.G.PANDIT) JUDGE

NC CT:bms List No.: 1 Sl No.: 24

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