An Ex-parte Penalty Order Passed Without a Proper Hearing Violates Natural Justice and Must Be Quashed.
Issue
Whether a penalty order passed ex-parte under section of the Income-tax Act, 1961, is valid if the assessee was not granted an opportunity of being heard, thereby violating the principles of natural justice.
Facts
- The assessee was subjected to a penalty under section , read with section , of the Income-tax Act, 1961 for the assessment year 2022-23.
- The penalty order was passed ex-parte, meaning it was decided without the participation of the assessee.
- There was some confusion regarding whether the assessee had properly requested an opportunity of hearing through the designated tab on the income tax portal.
- The assessee contended that they were denied a fair chance to present their case before the order was passed.
Decision
The court held in favour of the assessee.
- It was concluded that passing the order without ensuring a proper hearing for the assessee constituted a violation of the principles of natural justice.
- The court quashed (set aside) the impugned ex-parte penalty order.
- The tax authorities were directed to grant the assessee a fresh opportunity of being heard and then pass a new order in accordance with the law.
Key Takeaways
- Right to be Heard is Fundamental: The principle of audi alteram partem (let the other side be heard) is a cornerstone of legal procedure. A quasi-judicial order, such as a penalty order, passed without affording a fair hearing is legally unsustainable. ⚖️
- Procedural Lapses Matter: Confusion arising from procedural technicalities, such as navigating an online portal, should not result in the denial of a fundamental right like a personal hearing.
- Remedy for Violation: When an order is quashed due to a violation of natural justice, the typical remedy is not to nullify the proceedings entirely but to remand the case back to the authority. This ensures that the case is decided on its merits after correcting the procedural defect.
HIGH COURT OF ALLAHABAD
Beyond Research and Development Ltd.
v.
Income-tax Officer
Shekhar B. Saraf and Praveen Kumar Giri, JJ.
WRIT TAX No. – 1764 of 2024
SEPTEMBER 1, 2025
Rishi Raj Kapoor for the Petitioner. Gaurav Mahajan and Manu Ghildyal for the Respondent.
ORDER
1. Heard learned counsel appearing on behalf of the parties.
2. This is a writ petition under Article 226 of the Constitution of India wherein the writ petitioner prays for the following reliefs:
| “a) | Issue a writ and / or order and or direction in the nature of certiorari or any other appropriate writ, order or direction quashing the impugned order dated 06.09.2024 for the Assessment Year 2022-23 passed by Respondents under section 271D of the Income Tax Act, 1961 and proceedings initiated pursuant thereto; |
| (b) | Issue a writ and/or order and/or direction in the nature of mandamus to restrain the respondents from giving effect to and/or taking any step whatsoever pursuant to and/or in furtherance of the impugned order dated 06.09.2024 U/s 271D of the Income Tax Act, 1961 and/or in any proceedings initiated there under for the Assessment Year 2022-23; |
| (c) | Without prejudice, in alternate give the directions to the Respondents to not insist on the demand raised in pursuance to the order dated 6.09.2024 passed U/s 271D for the A.Y. 2022-23, till the appeal is finally heard by the appellate authorities;” |
3. Upon a perusal of the impugned order passed under Section 271D of the Income Tax Act 1961, it appears that the said order is an ex-parte order.
4. Mr. R.R. Agarwal, learned Senior Advocate along with Mr. R.R. Kapoor, learned counsel for the petitioner submit that inspite of a request made for an opportunity of hearing under the Faceless Penalty Scheme, no opportunity was granted to the petitioner.
5. This submission is vehemently denied and disputed by Mr. Manu Ghildyal, learned counsel appearing on behalf of the Income Tax Department. He placed the instructions received, before us.
6. There does appear to be some confusion in the matter regarding whether the petitioner had opted for an opportunity of hearing in the appropriate tab on the portal.
7. Without going into the merits of the same, we are of the view that since there is a confusion in the said matter and there has been a violation of principles of natural justice, as the order passed is an ex-parte order, another opportunity may be given to the petitioner.
8. Accordingly, we quash and set aside the impugned order dated 06.09.2024 for the Assessment Year 2022-23 passed by the respondents under Section 271D of the Income Tax Act, 1961 and direct the authorities to grant an opportunity of hearing to the petitioner and thereafter pass an order in accordance with law.
9. We make it clear that once the date is provided to the petitioner, the petitioner shall appear in person in the manner prescribed under the Faceless Penalty Scheme 2021, without seeking any adjournment whatsoever. The entire process should be completed within a period of eight weeks from date.
10. With the aforesaid directions, the writ petition is disposed of.