When Silence Is Not Golden: Bombay HC Affirms Right to Fair Hearing in Tax Appeals

The Bombay High Court has delivered a significant ruling reinforcing the fundamental right to a fair hearing, emphasizing that tax authorities and tribunals cannot bypass the principles of natural justice, even under the efficiency-driven "faceless" assessment regime. The order provides relief to a retired serviceman, Vijay Shrinivasrao Kulkarni, whose tax appeal was dismissed by the Income Tax Appellate Tribunal (ITAT) without providing an adequate opportunity to present his case.

A Struggle Against the Odds

The dispute originated from the Assessment Year 2019-20, during which Mr. Kulkarni—a former employee of Pfizer Healthcare—entered into a settlement following the closure of the company’s Aurangabad plant. While the petitioner sought relief under Section 89(1) of the Income Tax Act, his claim was denied, and the Income Tax Officer passed an ex parte assessment order.

The subsequent appeal at the National Faceless Appeal Centre (NFAC) was also dismissed ex parte after the petitioner’s counsel sought multiple adjournments to engage specialized representation. When the matter reached the ITAT in Pune, the bench denied the petitioner's request to remand the matter back to the NFAC for a hearing on merits, refused a short adjournment to prepare a paper book, and proceeded to pass an order on the same day the petitioner submitted his final written submissions.

The Arguments: Efficiency vs. Justice

Counsel for the petitioner, Mr. Sanket S. Bora, argued that the ITAT’s refusal to grant a meaningful hearing or consider the submitted records caused "serious prejudice." He highlighted that in similar instances on the very same day, the ITAT had adopted a more lenient approach by remanding matters to the assessing officer, which suggested an inconsistent and unfair application of judicial discretion in the petitioner’s case.

Conversely, the Revenue contended that the petitioner had received ample opportunity throughout the assessment process to represent his case. Counsel for the respondents argued that the relief sought under Section 89(1) was legally untenable due to the proviso of the section, and that remanding the case would be an "exercise in futility."

The Court’s Analysis: The Constitutional Mandate

The Division Bench of Justice G. S. Kulkarni and Justice Advait M. Sethna did not mince words regarding the procedural lapses. The Court noted that the violation of natural justice in this case was not merely a technical error but "palpable and clearly visible."

Drawing upon the Supreme Court’s landmark rulings in Delhi Transport Corporation v. DTC Mazdoor Union and Commissioner of Income Tax Madras v. Chenniyappa Mudiliar , the Court reaffirmed that the audi alteram partem rule (the right to be heard) is an essential component of Article 14 of the Constitution of India. The bench held that an appellate tribunal acts in a quasi-judicial capacity and is bound to dispose of appeals on their merits rather than dismissing them due to the absence of the appellant or an incomplete presentation.

Key Observations

The judgment serves as a stern reminder to tax tribunals regarding their duties:

• "At the very outset in our view this is a case where the violation of the settled principles of natural justice is not just apparent but real, palpable and clearly visible."
• "The principle of audi alteram partem is a part of Article 14 of the Constitution of India. In light of such decision, the petitioner ought to have been granted an opportunity of being heard."
• "There is no escape from the conclusion that under the said provision, the appellate tribunal had to dispose off the appeal on merits which could not have been done by dismissing the appeal summarily."

A Fresh Start

The Bombay High Court has set aside the impugned ITAT order of 12 March 2024 and directed the tribunal to conduct a de novo (fresh) hearing of the appeal. The ITAT has been tasked with passing a new order on merits within six weeks.

This ruling reinforces a vital protection for taxpayers: the pursuit of tax revenue cannot come at the expense of procedural fairness. For the average citizen navigating the complexities of facial assessments and tax litigation, this judgment offers a clear legal shield against arbitrary or rushed proceedings.