Adverse tax assessment and heavy civil liability demand set aside for denying personal hearing despite assessee ticking "No"

The dominant issue was whether an adverse assessment creating heavy civil liability could be sustained without affording a real opportunity of personal hearing. Applying the principle accepted in a coordinate Bench decision, the HC held that the assessing authority bears a mandatory duty to grant personal hearing before passing an adverse order, and the assessee's indication of "No" in a hearing-preference column does not waive that duty. Since the reply to the show-cause notice had been entertained but no effective hearing preceded the demand, the order violated natural justice. The impugned order was set aside and the matter was remitted to the assessing authority to issue a fresh notice within two weeks.

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Issues involved: Challenge to the order passed by the Deputy Commissioner for excess tax demand without affording opportunity of personal hearing as mandated by Section 75(4) of the U.P. GST Act, 2017.

Summary:

1. Background:
The matter involves a challenge to the order passed by the Deputy Commissioner, State Tax, for the tax period July 2017 to March 2018, raising a demand in excess of Rs. 26 Lacs against the petitioner.

2. Legal Ground:
The main contention in the petition is the absence of opportunity of personal hearing before passing the adverse assessment order, as the only notice issued to the petitioner was on 12.07.2022 seeking a reply within 15 days.

3. Legal Interpretation:
Referring to Section 75(4) of the U.P. GST Act, 2017, the Court relied on previous judgments to emphasize that the Assessing Authority must grant an opportunity of hearing before passing an adverse order, regardless of the assessee's choice to avail personal hearing.

4. Observations:
The Court agreed with the principle that in cases involving heavy civil liability, providing a meaningful opportunity of hearing is essential to uphold natural justice. The authorities must ensure a genuine opportunity for the assessee to present their case before making decisions that may have significant financial implications.

5. Decision:
Consequently, the writ petition was allowed, setting aside the impugned order dated 21.03.2023. The matter was remitted to the Assistant Commissioner to issue a fresh notice to the petitioner within two weeks, emphasizing the importance of conducting proceedings expeditiously while upholding principles of natural justice.

This summary provides a detailed breakdown of the legal judgment, highlighting the issues, legal interpretations, court observations, and the final decision made by the High Court in the case.

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