2020 (10) TMI 728 - HC - VAT and Sales Tax

Court emphasizes fair hearing rights in penalty assessment order, stresses timely notice service

M/s. Jayam Garments, rep. by its Partner Mr. Mohammed Ibrahim Versus The State Tax Officer, Central II Assessment Circle, Tiruppur-II, Tiruppur

The Court found a breach of natural justice principles in the assessment order due to non-service of notice and order on the Assessee. The matter was ... Violation of principles of natural justice - recovery of TDS - Service of notice - HELD THAT:- We are not inclined to interfere with the order passed by the learned Single Judge in any manner because the allegation of breach of principles of natural justice made by the Assessee has already been found in favour by the learned Single Judge in the impugned order passed by setting aside the order dated 9.2.2017 which was passed after the Show Cause Notice dated 1.9.2016 - When challenge was raised before the learned Single Judge, the Petitioner/Assessee was able to satisfy the learned Single Judge that the notice and the impugned order were never served on the Assessee and therefore, opportunity of hearing was not given to the Assessee. Since the matter has been remanded back to the Assessing Authority to give an opportunity of hearing to the Assessee on this ground, there is no reason to interfere with the said order, which is essentially in favour of the petitioner only. Apparently, the remand order is only for looking into the issue of TDS made by the Assessee and deposit or recovery thereof - the Assessee is directed to appear before the Assessing Authority in the first instance on 21.10.2020 at 11.00 am and further it is directed that the Assessing Authority to pass appropriate orders after hearing the Assessee as early as possible, preferably within one month thereof. Issues involved:1. Breach of principles of natural justice in assessment order2. Non-service of notice and order on the Assessee3. Recovery of Tax Deducted at Source (TDS) and penalty4. Opportunity of hearing before imposing penalty5. Remand of the matter to Assessing AuthorityAnalysis:1. The Assessee filed an intra-court Appeal against the order allowing the Writ Petition and directing the Assessing Authority to redo the assessment. The Single Judge found a breach of natural justice principles before passing the assessment order on 9.2.2017, which was passed based on a notice dated 1.9.2016.2. The Appellant's counsel argued that the notice and order were not served on the Assessee in a timely manner, leading to the Writ Petition. The documents revealed that the assessment was related to recovering TDS from payments made to subcontractors, with a penalty of 150%. The Assessee contended that they were not served with the notice and order, denying them an opportunity to be heard.3. The Court reviewed the documents and the Single Judge's order, deciding not to interfere as the breach of natural justice was already established. The Assessee had the TDS amount recovered through Garnishee Proceedings. The Single Judge set aside the order and remanded the matter to the Assessing Authority for proper hearing on the penalty imposition.4. The Court emphasized that TDS, being government money, must be deposited without delay. The penalty of 150% requires a hearing before imposition. The matter was remanded to the Assessing Authority for a fair decision on the penalty aspect, ensuring the Assessee's right to be heard.5. The Court directed the Assessee to appear before the Assessing Authority on a specified date and instructed the Authority to pass orders promptly. The recovered amount was to be subject to fresh orders by the Authority and any subsequent Appellate decisions. The Writ Appeal was disposed of without costs, and the related Miscellaneous Petition was closed.This judgment highlights the importance of natural justice in assessments, the need for timely service of notices, and the requirement of a fair hearing before imposing penalties. The Court's decision to remand the matter to the Assessing Authority ensures procedural fairness and upholds the Assessee's rights in the assessment process.