Independent tax enquiry required before confirming demand based solely on another authority's show cause notice

A tax demand cannot be sustained merely because it follows a show cause notice issued by another authority under a different enactment; the assessing authority must base its decision on independent material from its own enquiry. Where the assessee's principal objection on that point is raised but not dealt with, a remand order is defective because it fails to address the core jurisdictional and factual challenge. The Karnataka High Court therefore set aside the remand order to that extent and sent the matter back for fresh consideration of the main objection, keeping all questions of law open.

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Issues: Whether the remand order was sustainable when the principal contention that the tax demand was founded solely on a show cause notice issued by another authority under a different enactment had not been adjudicated.

Analysis: The assessee had specifically contended that the KVAT authorities proceeded only on the basis of the DRI show cause notice and had not made any independent investigation or collected material on their own. A tax demand or its confirmation cannot rest merely on another agency's notice issued in separate proceedings unless the assessing authority has sufficient material from its own enquiry. Since the principal contention was noticed but not answered, the remand order did not deal with the core jurisdictional and factual challenge raised by the assessee.

Conclusion: The remand order was set aside to the extent it failed to decide the principal contention, and the matter was sent back for fresh consideration of that issue.

Final Conclusion: The dispute was remitted for a fresh decision on the main objection, with all questions of law kept open.

Ratio Decidendi: A tax demand confirmed without independent investigation by the assessing authority, and based solely on a show cause notice issued in separate proceedings under another enactment, is vulnerable unless the principal objection is specifically adjudicated on merits.

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