Concessional tax rate dispute: higher assessment cannot be made without notice and hearing before increasing the burden.

Where an assessee claims concessional taxation for part of the turnover and the assessing authority proposes to apply a higher rate to the entire turnover, the authority must first issue notice and afford a hearing before enhancing the tax burden. A reassessment completed without putting the assessee on notice and without hearing was held to breach the mandatory statutory procedure and the principles of natural justice. The assessment was therefore unsustainable.

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Issues: Whether the assessing authority could enhance the tax rate from 2% to 6% and complete the assessment without issuing notice to the assessee and affording an opportunity of hearing.

Analysis: The assessee's return specifically claimed that part of the turnover was taxable at 2% under the statutory provision governing concessional tax treatment, while the assessing authority proposed to tax the entire turnover at 6%. Once the return as to the applicable rate was not accepted, the authority was required to put the assessee on notice and hear her before raising the tax burden. The absence of such opportunity amounted to non-compliance with the mandatory statutory requirement and offended the principles of natural justice.

Conclusion: The assessment made without notice and hearing was unsustainable, and the challenge by the assessee succeeded.

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