Penalty quashed as show cause notice & personal hearing decided in 48 hours

Penalty order quashed as show cause notice and opportunity of personal hearing was wrapped up in 48 hours

In a recent judgment, Hon’ble High Court of Himanchal Pradesh quashed penalty order as the show cause notice and opportunity of personal hearing was wrapped up in 48 hours.

ABCAUS Case Law Citation:
4482 (2025) (03) abcaus.in HC

In the instant case, the assessment proceedings against the petitioner were carried out and finalized and separate proceedings for imposition of penalty were also initiated on the same day itself. However, the petitioner then filed an appeal against the assessment authority which came to be dismissed.

Despite the quantum appeal having been dismissed, the Income Tax Department  made no efforts to impose the penalty and on one fine day, after more than one and half year, issued show cause notice under Section 271(1)(c) of the Act calling upon the petitioner to submit its response along with supporting documentary evidence, if any, by the very next day and case was fixed for oral arguments on one day thereafter, on which date it was finally decided and penalty was imposed.

Aggrieved by the penalty imposed, the assessee filed a Writ Petition before the Hon’ble High Court and contended that he was not afforded an opportunity of hearing.

The Hon’ble High Court observed that no doubt, the petitioner as per this show cause notice was to be afforded an opportunity of personal hearing.  But all this exercise of giving opportunity to file documents and thereafter an opportunity of personal hearing was wrapped up in 48 hours.

The Hon’ble High Court observed that the parameters of principles of natural justice cannot be covered by any straight jacket formula.  It would vary depending upon he circumstance involved.  Likewise, what would be “reasonable opportunity” would also depend upon the fact situation. The opportunity to be heard is a fundamental requirement of procedural due process.  It ordinarily includes the right to receive fair notice of the hearing, to secure the assistance of counsel, and to cross-examine adverse witnesses. Since the proceedings in a Court of law as well as quasi judicial proceedings are conducted in due process.

The Hon’ble High Court opined that the petitioner was deprived of its right of fair hearing as contemplated under the law given the fact that vide notice less than 24 hours’ time was granted to it to produce the documentary evidence and equal time, i.e., less than 24 hours’ time was granted for addressing oral arguments by calling upon it on the very next day on which date, it was finally decided.

In the given facts and circumstances, the Hon’ble High Court held that order imposing penalty was not sustainable and subsequently even the demand notice issued under Section 156 of the Income Tax Act was also not sustainable and accordingly both, penalty order and demand notice, were quashed and set aside.

As a result, the matter was remanded back to the authority with a direction to afford a meaningful opportunity to the petitioner to file its response along with documentary evidence and further provide the petitioner an opportunity of personal hearing.  The entire exercise be completed within a period of two months.

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