High Court Sets Aside Penalty Order for Under-reporting of Income Due to Violation of Natural Justice

Case Name:

Genesis Institute of Medical Science Private Limited v. Income Tax Officer & Others

Key Takeaways:

1. The penalty order under Section 270A (of Income Tax Act, 1961) of the Income Tax Act, 1961, was set aside by the High Court due to a violation of the principles of natural justice.
2. The Court remanded the matter back to the 4th respondent for proper communication of the date of hearing to the petitioner.
3. The petitioner was warned that no further opportunity would be granted if they failed to appear and make submissions in response to the notice of hearing, and adjournment on the date of hearing would not be allowed.

Case Synopsis:

A judgment from the High Court of Kerala at Ernakulam, delivered by the Honorable Mr. Justice Dinesh Kumar Singh on the 24th day of November 2023. The case in question is WP(C) No. 21424 of 2023, and it involves Genesis Institute of Medical Science Private Limited as the petitioner and the Income Tax Officer and others as the respondents.

The petitioner, Genesis Institute of Medical Science Private Limited, challenged the order in Ext.P9 dated 8.6.2023, which was passed under Section 270A (of Income Tax Act, 1961) of the Income Tax Act, 1961, in respect of the assessment year 2021-22. The assessment resulted in the addition of Rs. 8,37,97,401/- to the returned income of the petitioner for the assessment year under consideration. This amount was detected during the course of scrutiny assessment proceedings, leading to penalty proceedings under Section 270A (of Income Tax Act, 1961) for under-reporting of income due to misreporting.

The petitioner did not challenge the assessment order but was only aggrieved by the penalty order passed under Section 270A (of Income Tax Act, 1961). The petitioner was issued show cause notices on two occasions, and in response, the petitioner filed its replies and requested adjournment. However, the impugned order, Ext.P9, was passed without fixing a date for hearing after the petitioner’s reply to the show cause notice dated 6.4.2023.

The High Court, upon perusal of the impugned order, found that it was passed in violation of the principles of natural justice as no date of hearing was communicated to the petitioner after its reply to the show cause notice. As a result, the impugned order dated 8.6.2023, Ext.P9, was set aside, and the matter was remanded back to the 4th respondent to communicate the date of hearing to the petitioner on the Portal of the Income Tax Department and through the provided email ID. It was made clear that if the petitioner fails to appear and make submissions in response to the notice of hearing, no further opportunity shall be granted to the petitioner, and adjournment on the date of hearing shall not be sought by the petitioner.

FAQ:

Q1: What was the judgment about?

A1: The judgment was about a penalty order passed under Section 270A (of Income Tax Act, 1961), and the violation of natural justice in the process.

Q2: Who were the parties involved in the case?

A2: The petitioner was Genesis Institute of Medical Science Private Limited, and the respondents included the Income Tax Officer and others.

Q3: What was the outcome of the judgment?

A3: The High Court set aside the penalty order and remanded the matter back to the 4th respondent for proper communication of the date of hearing to the petitioner.