Fair notice and hearing are mandatory in mismatch tax proceedings; unsustainable assessment set aside and remitted for fresh action.

Mismatch-based tax liability could not be sustained without a fair notice setting out the relevant particulars, an opportunity to reply, and a personal hearing. The Madras HC held that the impugned assessment order was unsustainable for non-compliance with the required procedure and set it aside. The matter was remitted for fresh action, with directions to issue a fresh show cause notice, allow the assessee to file an explanation and be heard, and then pass a reasoned order in accordance with law. The assessee was also held not entitled to raise limitation against the fresh notice.

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Issues: Whether the assessment order based on mismatch invoices could be sustained, and whether the matter required issuance of a fresh show cause notice with a fresh hearing.

Analysis: The impugned order was found unsustainable in view of the governing procedure for mismatch cases and the need to follow a fair process before fastening tax liability. The assessee was therefore entitled to a fresh notice containing the required particulars, an opportunity to submit its explanation, and a personal hearing. The Court also made it clear that the assessee could not raise a plea of limitation against the fresh notice.

Conclusion: The impugned order was set aside and the matter was remitted for fresh action in accordance with law, with directions to issue a fresh show cause notice and pass a reasoned order after hearing the assessee.

Final Conclusion: The assessee obtained partial relief as the adverse order was annulled, but the dispute on tax liability was left open for reconsideration by the assessing authority after due .

Ratio Decidendi: In mismatch-based tax proceedings, liability cannot be sustained without a fair notice, disclosure of particulars, and an opportunity of hearing, and any resulting decision must be reasoned and made in accordance with law.

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