VISHWANATH SUGAR AND vs. THE JOINT COMMISSIONER OF INCOME TAX

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 16TH DAY OF MARCH, 2017 BEFORE THE HON'BLE MR. JUSTICE L. NARAYANA SWAMY WRIT PETITION NO.104162 OF 2015 (T-IT) BETWEEN VISHWANATH SUGAR AND STEEL INDUSTRIES LIMITED, (NOW CALLED AS VISHWARAJ SUGAR INDUSTRIES LTD.,), HAVING REGISTERED OFFICE AT BELLAD BAGEWADI, HUKKERI TALUK, BELAGAVI DISTRICT. REPRESENTED BY ITS EXECUTIVE DIRECTOR, MR. MUKESH KUMAR. ... PETITIONER (By SHRI V. SHESHACHALA, SR. ADVOCATE FOR SHRI GANGADHAR J M AND PRAVEEN P. TARIKAR, ADVOCATES) AND 1. THE JOINT COMMISSIONER OF INCOME TAX RANGE-1, BELAGAVI. OPPOSITE TO CIVIL HOSPITAL, DR. AMBEDKAR ROAD, BELAGAVI.

2 2. THE PRINCIPAL, COMMISSIONER OF INCOME TAX RANGE-1, BELAGAVI. OPPOSITE TO CIVIL HOSPITAL, DR. AMBEDKAR ROAD, BELAGAVI. 3. THE INCOME TAX OFFICER (HQ), OPPOSITE TO CIVIL HOSPITAL, DR. AMBEDKAR ROAD, BELAGAVI. ... RESPONDENTS (By SHRI Y V RAVIRAJ, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER DATED 27.03.2015 AS PER ANNEXURE-A ISSUED BY THE 1ST RESPONDENT AND ORDER DATED 27.03.2015 ISSUED BY THE 3RD RESPONDENT ON BEHALF OF 2ND RESPONDENT AS PER ANNEXRUE-B.; DIRECT THE 1ST RESPONDENT TO ACCEPT THE RETURNS FILED BY THE PETITIONER FOR THE ASSESSMENT 2012-13; AND ETC. THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS COURT, MADE THE FOLLOWING: O R D E R Petitioner in this petition is challenging the validity of the order passed under Section 142(2A) of the Income Tax Act, 1961 (for brevity hereinafter referred to as ‘the Act’). The grounds urged are that while issuing the said order, as required

3 under proviso to Section 142(2A) of the Act, reasonable opportunity should have been given to the petitioner. Without complying with the said provision, the respondents have issued notice on 20th March 2015 directing the petitioner to appear on 23rd March 2015, i.e. within two days from the date of issuance of notice. It would be practically impossible for the petitioner to answer or to prepare, since issue involved is of complex nature. The object of issuance of notice is to provide a reasonable opportunity and not just an opportunity by providing time to the petitioner to appear within three days from the date of issuance of the notice. Hence, the learned counsel submits to set aside the Notice Annexure-AC dated 20th March 2015 and pass appropriate order directing the respondents to provide a reasonable opportunity to the petitioner as provided under proviso to Section 142(2A) of the Act. The learned counsel for the petitioner places reliance on the judgment of Hon'ble Supreme Court in the case of SAHARA INDIA (FIRM) v. COMMISSIONER OF INCOME TAX AND ANOTHER reported in (2008) 300 ITR 403 and refers to paragraph 23 and 24 of the judgment.

4 2. The learned counsel appearing for the respondent- Revenue submits to dismiss the petition. He submits that though by notice dated 20th March 2015 the petitioner was directed to appear on 23rd March 2015, but on the request made by the petitioner, on the said date, the petitioner was provided further time till 26th March 2015. On 26th March 2015, the petitioner sought further time and the same was rejected. Hence, the impugned order Annexure-A cannot be said to be in error. 3. Heard the learned counsel for the parties. In the light of the submissions made by the learned counsel for the petitioner, I have gone through the proviso to Section 142(2A) of the Act. The proviso very clearly states that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given a reasonable opportunity of being heard. Here, the emphasis is to be given on the words “reasonable opportunity”. The requirement of law is not to provide just an opportunity, but it should be a reasonable opportunity and the reasonableness depends upon

5 case to case. The multiplicity or complexity of the case depends upon the duration of time to be provided to the party from the date of issuance of notice. In the instant case, the notice Annexure-AC issued to the petitioner on 20th March 2015 asking to appear on 23rd March 2015. In that case, the petitioner is left with only two days for preparing itself for answer. Since, 20th March 2015 is the date on which the communication addressed and the petitioner to report before the respondent on 23rd March, 2015, the petitioner was left with only two days, i.e. 21st and 22nd March, 2015 to get itself prepared. That cannot be said to be a reasonable opportunity that is provided to the petitioner, as it is stated by the petitioner that the matter is of complex nature and it would be reasonable on behalf of the respondent to grant some more time. The Hon'ble Supreme Court in the case of SAHARA INDIA (supra) has observed that an order under Section 142(2A) of the Act entail civil consequences, even after the obligation to pay auditor’s fees and incidental expenses has been taken over by the Central Government, and therefore the rule of audi alteram partem, is required to be observed and asessee has to be provided a reasonable opportunity of being heard. In the

6 light of the above judgment, it is very clear that unless the aggrieved party is provided fullest opportunity in compliance of principle audi alteram partem, it would not make the fullest opportunity as provided under Section 142(2A) of the Act. Though proviso is silent about reasonable opportunity, it refers opportunity to both the petitioner as well as the respondent, depending upon the complexity of the cases to provide reasonable opportunity. Reasonable opportunity is to be exercised by the respondent depending upon the case and also on the basis of the request made by the party considering the above aspect. 4. In the case on hand, I feel what has been given to the petitioner is contrary to the principles of audi alteram partem and has not followed the principles of natural justice. Accordingly, Annexure-A dated 27th March 2015 and Annexure- AC dated 20th March 2015 are liable to be set aside and are accordingly set aside. It is further directed that the Notice dated 20th March 2016 is restored to file. Petitioner is directed to appear before the respondent on 28th March, 2017, without

7 waiting for any notice in this regard. It is made clear that in case if the limitation comes into picture, it is for the petitioner to make an application; and the respondent is directed to pass appropriate orders. Petition accordingly stands disposed of. Sd/- JUDGE lnn