Tax authorities' assessment orders quashed for failing to issue Section 74(1) show cause notice after search proceedings

The HC quashed assessment orders issued by tax authorities following search and seizure proceedings at petitioner's premises. Despite petitioner's objections and authorized representative's appearance, authorities failed to follow prescribed procedures under TNGST Act. The court found that after issuing Form DRC-01A notice, a show cause notice under Section 74(1) should have been issued before finalizing assessment orders. The procedural violations constituted breach of natural justice principles. Consequently, the assessment orders and recovery notice to bank were quashed, with directions to tax authorities to reissue notices following proper statutory procedures and provide adequate hearing opportunity before passing fresh orders.

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Issues:
Challenging assessment orders for multiple assessment years based on surprise inspection findings.

Analysis:
The petitioner, engaged in trading textiles and garments, challenged assessment orders for various years following surprise inspections at showrooms. The inspection revealed irregularities leading to revision of assessments and issuance of show cause notices. The petitioner disputed tax liabilities and procedural flaws, alleging misinterpretation of provisions and violation of natural justice principles.

The petitioner objected to inspection procedures and findings, requesting time to respond to communications pointing out defects and tax liabilities. Despite objections and requests for personal hearings, the respondent proceeded to confirm proposed tax, penalty, and interest amounts without issuing proper show cause notices as mandated by the law.

The petitioner argued that the assessment order violated principles of natural justice, citing circulars and legal precedents to support their case. The respondent contended that the notices and assessments were in accordance with the law, placing the burden of proof on the dealers to demonstrate tax compliance and address issues raised in the show cause notices.

The Court noted discrepancies in the assessment process, highlighting the failure to follow proper procedures post-inspection and the issuance of recovery notices without due process. Consequently, the Court quashed the assessment orders and directed the respondent to adhere to prescribed procedures, issue show cause notices, and pass orders in compliance with the law promptly.

In conclusion, the Court allowed the writ petitions, quashed the assessment orders and recovery notices, and instructed the respondent to conduct the assessment process following legal requirements without delay.

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