ITAT Cannot Perpetuate Ex-Parte Order: Bombay High Court Orders Tribunal To Grant Opportunity Of Hearing To Assessee Before Proceeding On Merits

Stating that ITAT cannot “perpetuate” the ex-parte order, a division bench of Justices GS Kulkarni and Advait M. Sethna directed the Tribunal to hear the employee de novo, so far as his prayer for the grant of exemption under section 89 of the Income Tax Act, 1961 is concerned.

The provision provides relief to an assessee for advance salary, family pension etc.

The Petitioner-assessee had initially sought relief under the provision in relation to Rs.13,22,187/- received from the employer on account of the closure of its plant, claiming it as 'salary advance'.

However, Petitioner's case was selected for scrutiny assessment. Subsequently, the petitioner withdrew the relief sought under section 89 and alternatively claimed receipts of Ex-Gratia and other incentives as capital receipts.

The Petitioner's submissions were rejected on the ground that the amount received on termination of employment cannot be treated as salary in advance, and thus, an assessment order came to be passed by the AO.

Thereafter, the National Faceless Appeal Centre confirmed the assessment order ex-parte.

The petitioner's appeal before the ITAT also came to be dismissed, statedly without granting an opportunity of hearing.

The petitioner claimed that the ITAT ought to have remanded the matter to the NFAC since it passed an ex-parte order. It was further submitted that the petitioner was not given any opportunity to plead his case before the ITAT in as much as the ITAT even turned down the request made by the petitioner's Advocate to submit a paper book for which a short adjournment was sought.

At the very outset, the High Court observed that the Petitioner was deprived of an opportunity to present its case not only before the AO but also subsequently before the ITAT. It remarked,

“This is a case where “violation of the settled principles of natural justice is not just apparent but real, palpable and clearly visible. In not affording a reasonable opportunity to the petitioner to present its case had perpetuated from the ex-parte order passed by respondent no. 2 which in our opinion was not noticed by the ITAT in passing the impugned order.”

The Court referred to Delhi Transport Corporation v. DTC Mazdoor Union (1999) where the Supreme Court had held that Article 14 guarantees a right of hearing to a person who is adversely affected by an administrative order.

“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 which, partakes the characteristic of the fundamental right under Article 14 of the Constitution of India.”

In this case, the Court noted that the jurisdictional assessing officer under the faceless regime passed an ex-parte assessment order without affording an opportunity to the petitioner to be heard, and it said such infirmity should have been addressed by the ITAT.

Accordingly, the matter was remanded to ITAT for de novo hearing of the petitioner's appeal. It directed, “ITAT shall after hearing the parties, pass fresh orders on merits and in accordance with law.”

Appearance: Mr. Sanket S. Bora a/w Ms. Unnatii A. Thakkar i/b. SPCE, for the Petitioners. Mr. A.K. Saxena, for the Respondent - State.

Case title: Vijay Shrinivasrao Kulkarni v. ITAT Pune Bench & Ors. (WRIT PETITION NO. 17572 OF 2024)

Citation: 2025 LiveLaw (Bom) 76

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