Tax-at-source liability rests on the collecting entity, and assessment must be redone after proper hearing.

Liability for short collection of tax at source under section 13 of the Tamil Nadu Value Added Tax Act, 2006 rested on the collecting purchasing entity, not on the assessee, so the assessment proceeded on an ? no English. On that incorrect premise, the assessment orders under section 27(1)(a) could not stand. Because the assessee's claim that full turnover was disclosed and tax paid required verification, the matter was remanded for fresh consideration after notice and personal hearing, leaving the substantive tax position open for reconsideration.

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Issues: (i) Whether liability arising from short collection of withholding tax under section 13 of the Tamil Nadu Value Added Tax Act, 2006 rested on the purchasing entity or on the assessee; (ii) whether the assessment orders passed under section 27(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 were liable to be set aside and the matter remanded for fresh consideration.

Issue (i): Whether liability arising from short collection of withholding tax under section 13 of the Tamil Nadu Value Added Tax Act, 2006 rested on the purchasing entity or on the assessee.

Analysis: Liability under section 13 was held to fall on the entity required to collect tax at source, and not on the assessee. Any consequence flowing from short collection of withholding tax could therefore be visited only on the collecting entity. The assessments proceeded on the wrong premise that the assessee could be made liable for the shortfall.

Conclusion: The liability for short collection of withholding tax did not lie on the assessee, but on the collecting entity.

Issue (ii): Whether the assessment orders passed under section 27(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 were liable to be set aside and the matter remanded for fresh consideration.

Analysis: Since the assessing authority proceeded on an erroneous legal basis, the impugned assessment orders could not stand. At the same time, the assessee's assertion that the entire taxable turnover had been disclosed and the requisite tax paid required verification. The matter therefore needed reconsideration after notice and personal hearing.

Conclusion: The assessment orders were set aside and the assessments were directed to be redone after due opportunity to the assessee.

Final Conclusion: The assessee succeeded on the legal challenge to the basis of assessment, but the substantive tax position was left open for fresh adjudication by the assessing authority after hearing the assessee.

Ratio Decidendi: Where an assessment is founded on an incorrect understanding of statutory liability for tax collection at source, the assessment cannot be sustained and must be reconsidered after giving the assessee a proper opportunity of hearing.

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