2024 (3) TMI 895 - HC - GST

Assessment order quashed for erroneous tax calculation on all-India turnover instead of declared turnover with conditional remand

The HC quashed the assessment order dated 23.12.2023 due to non-application of mind by the assessing officer, who erroneously calculated tax based on ... Principles of natural justice - non-application of mind - jurisdiction - impleading of necessary party suo motu - remand subject to deposit - opportunity of personal hearingNon-application of mind - principles of natural justice - jurisdiction - Validity of the assessment order insofar as it relied on all India figures and whether it suffers from non application of mind and breach of principles of natural justice. - HELD THAT: - The Court examined the assessment order and found that the assessing officer had taken into account closing balances of creditors and total revenue and expenditure on an all India basis when making the assessment for Tamil Nadu, which indicated non application of mind. Although the assessment was preceded by an intimation and a show cause notice, the material conclusions in the impugned order reflected an erroneous basis for levy and improper application of figures beyond the State's scope. The petitioner's failure to participate in proceedings was noted, but that neglect did not cure the defect arising from the assessing officer's approach. For these reasons the assessment order was quashed and remitted for fresh consideration. [Paras 5, 7]Impugned assessment order quashed on grounds of non application of mind and remanded for fresh assessment in accordance with law.Impleading of necessary party suo motu - Whether the State Tax Officer should be made a party to the writ petition. - HELD THAT: - An objection was raised that the State Tax Officer was not arrayed as a party. The Court impleaded the State Tax Officer suo motu as the second respondent and directed the Registry to issue the order copy after amendment, thereby ensuring all necessary parties were before the Court for just adjudication. [Paras 4, 5]State Tax Officer impleaded suo motu as second respondent; Registry directed to amend and issue order copy.Remand subject to deposit - opportunity of personal hearing - Terms on which the matter is to be remitted for fresh assessment, including deposit and opportunity to be given to the petitioner. - HELD THAT: - The Court conditioned the quashing and remand on the petitioner remitting 5% of the disputed tax demand, observing the petitioner's willingness to make a deposit though rejecting a higher percentage as excessive. The petitioner was permitted to file a reply to the show cause notice within two weeks of receipt of the order copy along with the 5% deposit. Upon receipt of the reply and satisfaction as to the deposit, the assessing officer was directed to provide a reasonable opportunity, including a personal hearing, and to pass a fresh assessment order in accordance with law within two months. [Paras 6, 7]Quash and remand made conditional on payment of 5% of disputed tax demand; petitioner to file reply within two weeks; assessing officer to afford personal hearing and pass fresh assessment within two months.Final Conclusion: The assessment order dated 23.12.2023 is quashed for non application of mind and remitted for fresh assessment; the State Tax Officer is impleaded as respondent; remand is subject to the petitioner depositing 5% of the disputed demand and filing a reply within two weeks, and the assessing officer shall afford hearing and complete a fresh assessment within two months. Issues involved: Challenge to assessment order based on breach of natural justice and lack of jurisdiction.The assessment order dated 23.12.2023 was challenged primarily on the grounds of breach of principles of natural justice and lack of jurisdiction. An intimation in Form DRC-01A was issued to the petitioner in January 2023 following an inspection by the respondent in November 2022. The petitioner requested additional time to respond, but subsequently received a show cause notice and the impugned assessment order.The petitioner's counsel argued that the tax imposed under certain serial numbers was based on transactions carried out on an all India basis, highlighting discrepancies in the assessment. Specifically, it was noted that the assessing officer erroneously calculated the tax based on the difference between all India turnover and declared turnover. The counsel contended that the assessment order lacked jurisdiction and also suffered from non-application of mind.The Additional Government Pleader representing the respondent pointed out that the State Tax Officer was not included as a party in the writ petition. He further argued that the assessment order was a result of the petitioner's failure to participate in the proceedings and contest the tax demand despite prior intimation and show cause notice.The Court, upon noting the absence of the State Tax Officer as a party, impleaded them as the second respondent. The assessment order was found to reflect non-application of mind, particularly in considering all India basis figures for certain calculations. However, it was acknowledged that the petitioner neglected to respond to the show cause notice and engage in the proceedings, leading to the decision to quash the assessment order with a condition for the petitioner to remit 5% of the disputed tax demand for remand.The petitioner expressed readiness to comply with the condition for remand by remitting a reasonable portion of the disputed tax demand. The Court directed the petitioner to file a reply to the show cause notice within two weeks of receiving the order copy along with the 5% remittance. Upon satisfaction of this condition, the assessing officer was instructed to provide a reasonable opportunity, including a personal hearing, and issue a fresh assessment order within two months.The writ petition was disposed of with the condition that the petitioner remits 5% of the disputed tax demand for remand. The petitioner was granted two weeks to file a reply to the show cause notice. The assessing officer was directed to issue a fresh assessment order within two months after receiving the reply and the remittance. No costs were awarded, and related motions were closed.