Tax Authority Must Recalibrate Assessment After Procedural Flaws, Order Directs Fresh Evaluation with 10% Deposit and Reasonable Hearing

HC quashed assessment order for tax demand related to ITC return discrepancies. Court directed petitioner to deposit 10% of disputed tax, allowed response to show cause notice, and mandated fresh assessment by tax authority within two months. The ruling emphasized procedural fairness and opportunity to contest tax demand without questioning transaction legitimacy.

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Issues involved:
Assessment order challenged on grounds of breach of natural justice principles and non-adherence to circulars regarding GSTR-3B and GSTR-2A returns procedure.

Summary:
The petitioner, a registered person in the business of supplying base metals, contested an assessment order for the year 2019-20, which raised concerns about Input Tax Credit (ITC) claimed in GSTR-3B returns versus GSTR-2A returns. The petitioner, reliant on their accountant, missed responding to the notice and show cause due to lack of awareness. The petitioner argued lack of opportunity to contest the tax demand and non-compliance with circulars on procedures for return disparities.

The court noted that the tax demand was solely based on ITC differences between returns without questioning the transaction's genuineness. Acknowledging the petitioner's claim of circular non-adherence, the court decided to give an opportunity to contest the tax demand, with a condition to remit 10% of the disputed tax within two weeks. The petitioner was allowed to respond to the show cause notice within this period. Upon compliance and satisfaction, the assessing officer was directed to conduct a fresh assessment within two months, ensuring a fair opportunity for the petitioner, including a personal hearing.

The impugned assessment order was quashed, subject to the specified condition and timelines. The petitioner was granted the chance to contest the tax demand, ensuring procedural fairness. The case was disposed of with no costs, and related motions were closed accordingly.

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