Non-application of mind in input tax credit reversal led to quashing of notice and assessment for denial of effective hearing.

The pre-revision notice and assessment order reversing input tax credit were found unsustainable because the authority failed to apply its mind, denied an effective opportunity to object, and did not conduct a proper enquiry. The assessment was completed on the same day the objections were filed, without dealing with the taxpayer's explanations or supporting documents. The materials relied on against the taxpayer were not furnished, and no verification was made with the concerned dealers or their assessing authorities before treating the purchases as bogus. The notice and order were therefore quashed, while leaving the authority free to commence fresh proceedings in accordance with law.

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Issues: Whether the pre-revision notice and the assessment order reversing input tax credit were liable to be quashed for non-application of mind, denial of effective opportunity and failure to undertake proper enquiry.

Analysis: The notice required the petitioner to explain the proposed reversal and to pay the quantified amount, while the assessment was completed on the same day as the objections were filed. The order did not deal with the petitioner's explanations or the supporting documents said to have been produced. The materials relied upon against the petitioner were also not furnished, and no enquiry was made with the concerned dealers or their assessing authorities before branding the purchases as bogus. On these facts, the opportunity to object was only an empty formality and the assessment reflected a pre-decided approach.

Conclusion: The pre-revision notice and the assessment order were held to be bad in law and were quashed, leaving it open to the authority to initiate fresh proceedings in accordance with law.

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