Natural justice in assessment proceedings: failure to consider filed objections vitiates assessment and collapses consequential penalty action.

An assessment completed without considering objections already filed and acknowledged is vitiated for breach of natural justice, because the authority must give effect to the assessee's due opportunity before finalising the assessment. The Kerala High Court therefore set aside the assessment order. A penalty notice issued under Section 67 of the Kerala Value Added Tax Act, being founded solely on that assessment, could not independently survive once the assessment was quashed, so the consequential penalty notice was also set aside. The matter was remitted for fresh consideration after notice and hearing, with the question of any fresh penalty notice left open for the authority in the renewed proceedings.

---

---

Issues: (i) Whether the assessment order was liable to be set aside for failure to consider the assessee's objection and for breach of natural justice; (ii) Whether the penalty notice issued under Section 67 of the Kerala Value Added Tax Act could survive once the assessment order was set aside.

Issue (i): Whether the assessment order was liable to be set aside for failure to consider the assessee's objection and for breach of natural justice.

Analysis: The assessee had filed objections within the time available, and the acknowledgment showed receipt of those objections before the assessment order was passed. The assessment order, however, proceeded on the footing that no objection had been filed. A final assessment could not be completed without taking into account the objections already received. Non-consideration of the objection vitiated the assessment and amounted to denial of due opportunity.

Conclusion: The assessment order was liable to be set aside in favour of the assessee.

Issue (ii): Whether the penalty notice issued under Section 67 of the Kerala Value Added Tax Act could survive once the assessment order was set aside.

Analysis: The penalty notice was founded on the assessment order. Once the assessment order itself was set aside, the notice proposing penalty could not independently survive. The question whether a fresh notice under Section 67 was required was left to be considered by the authority in the fresh proceedings.

Conclusion: The penalty notice was also set aside in favour of the assessee.

Final Conclusion: The matter was sent back for fresh consideration after notice and hearing, with the earlier assessment and consequential penalty notice quashed.

Ratio Decidendi: An assessment completed without considering objections already received is vitiated for breach of natural justice, and any penalty action founded solely on such an assessment cannot stand.

---