Natural justice in tax assessment: failure to give promised personal hearing invalidated the order and led to remand.

Assessment orders imposing tax and penalty will be vulnerable where the assessee is not given the personal hearing promised in the notice and required by departmental circulars. Here, the Madras HC found that no date of hearing had been communicated before the order was passed, and this breach of natural justice was sufficient to invalidate the assessment. The Court did not examine the merits of the tax levy because no written reply had been filed, but it held that reasonable opportunity and personal hearing had to be afforded before finalising the assessment. The order was set aside and the matter remitted for fresh assessment.

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Issues: Whether the assessment order was liable to be set aside for denial of personal hearing and violation of principles of natural justice, and whether the matter should be remitted for fresh assessment.

Analysis: The assessment was challenged on the ground that the levy on certain works and wages was unsustainable and that penalty had been imposed without affording a personal hearing. The Court did not enter into the merits of the tax demand, as the assessee had not filed a written reply to the proposal notice. However, the notice itself contemplated personal hearing, and the departmental circular required that reasonable opportunity and personal hearing be invariably afforded before passing the order. Since no date of personal hearing had been communicated before imposing tax and penalty, the assessment order was found to suffer from breach of natural justice.

Conclusion: The assessment order was set aside and the matter was remitted for fresh assessment after affording personal hearing.

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