Tax Assessment Orders Invalidated: Procedural Flaws Expose Critical Gaps in Natural Justice Principles Under Section 153

HC of Madras quashed tax assessment orders due to procedural irregularities. The court found breaches in natural justice principles, specifically regarding insufficient notice and lack of opportunity to address tax credit discrepancies. The judgment directed reassessment with conditions, including partial tax remittance and opportunity for the taxpayer to present explanatory documentation within specified timelines.

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Issues involved: Challenge to assessment orders on the ground of breach of principles of natural justice.

The judgment by the High Court of Madras pertains to the challenge of assessment orders for five distinct assessment periods primarily on the ground of breach of principles of natural justice. The petitioner, engaged in trading automobile parts, had entrusted GST compliance to an accountant and claimed to have become aware of the assessment orders only in February 2024, following which the writ petitions were filed.

The petitioner's main contention was the mismatch between the GSTR 3B returns and auto-populated GSTR 2A returns. The petitioner argued that Circular No.183 provided a procedure for dealing with such discrepancies, including the opportunity for the taxpayer to submit a certificate from the supplier or a Chartered Accountant based on the discrepancy quantum. It was highlighted that detailed show cause notices were not issued, only a summary was provided to the petitioner.

The Government Advocate for the respondent contended that the petitioner had been given sufficient opportunity, as evidenced by the notice in Form ASMT-10 and prior intimation. It was argued that the burden lay on the taxpayer to prove entitlement to Input Tax Credit (ITC), which the petitioner allegedly failed to do.

Upon review of the documents and circumstances, the court noted the disparity between the returns and the issuance of Circular No.183 to address such issues. The petitioner had submitted a certificate from a Chartered Accountant explaining the discrepancies. Despite the petitioner's non-participation in the assessment proceedings, the court found justification to quash the assessment orders but imposed a condition for remand.

The court quashed the assessment orders and remanded the matters for reconsideration with the condition that the petitioner remits 10% of the disputed tax demand for each assessment period within 15 days. The petitioner was also allowed to respond to the show cause notice within the specified period. The assessing officer was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue fresh assessment orders within two months upon satisfaction of the remittance condition.

The writ petitions were disposed of with no order as to costs, and connected miscellaneous petitions were closed.

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