Kerala High Court Upholds Mandatory Personal Hearing in Income Tax Act Section 148A(B) Inquiry

Kerala High Court Upholds Mandatory Personal Hearing in Income Tax Act Section 148A(B) Inquiry

The Kerala High Court bench, comprising Justices A.K. Jayasankaran Nambiar and Kauser Edappagath, has ruled that providing a personal hearing to the taxpayer is mandatory during an inquiry under Section 148A(b) of the Income Tax Act.

The court based its decision on a previous case, Income Tax Officer v. Asamannoor Service Co-operative Bank Limited, where it was established that Section 148A explicitly requires granting the assessee an opportunity to be heard. The central question in the appeal was whether this opportunity must also include the right to a personal hearing.

The appellant/department contested the judgment delivered by the single judge in W.P. © No. 13727 of 2023. In the writ petition, the petitioner challenged the order issued by the Income Tax Officer, Ward-2, Aluva, under Section 148A(d) of the Income Tax Act. This order included a consequential notice proposing a re-assessment of income for the assessment year 2019-20.

The respondent or assessee argued that the department issued an order without giving the petitioner a chance to be heard, as required by Section 148A(b) of the Income Tax Act.

Consequently, they claimed that the order was flawed due to non-compliance with the principles of natural justice. Additionally, they asserted that the notice itself was legally invalidated.

The Single Judge determined that since Section 148A mandates granting the assessee an opportunity to be heard, the absence of a personal hearing for the assessee rendered the challenged orders and subsequent notices invalid. Consequently, both the order and notice were annulled. The writ petitioner was instructed to present themselves before the department, equipped with all relevant documents for the hearing. The court clarified that if the petitioner failed to appear on December 12, 2023, no further opportunity would be granted by the Income Tax Officer.

The department expressed concern specifically about the single judge’s ruling that a personal hearing is obligatory during an inquiry under Section 148A(b). The department argued that, given the nature of the proceedings, the statutory framework, and the language of the provisions, the assessee need not receive a personal hearing before issuing an order under Section 148A(d) of the Income Tax Act. The central question revolved around whether granting a personal hearing to the assessee is mandatory during an inquiry under Section 148A(b) of the Income Tax Act.

However, the court, in dismissing the department’s appeal, clarified that Section 148A of the Income Tax Act indeed requires granting the assessee an opportunity to be heard, and this opportunity must encompass the right to a personal hearing as well.