Fraud-based tax notices reclassified as ordinary proceedings, with fresh reply, hearing and reasoned adjudication directed.

Show cause notices invoking fraud, wilful misstatement and suppression were directed to be treated as notices under the ordinary assessment or recovery provision, with those fraud-based allegations redacted. The assessee was given six weeks to file a reply, and the Adjudicating Authority was required to pass a reasoned order after considering all submissions, with a personal hearing on advance notice. Any material proposed to be relied on had to be shared in advance so the assessee could respond. The matter was therefore sent back for fresh adjudication with procedural safeguards, without any decision on the merits of the tax demand.

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Issues: Whether the show cause notices issued invoking fraud, wilful misstatement or suppression could be treated as notices under the ordinary tax recovery provision, and whether the assessee was entitled to a fresh opportunity of reply and hearing before adjudication.

Analysis: The notices were directed to be deemed as issued under the ordinary assessment/recovery provision instead of the fraud-based provision, and the allegations of fraud, wilful misstatement and suppression were ordered to be treated as redacted. The assessee was granted six weeks to submit a reply. The Adjudicating Authority was directed to pass a reasoned order after considering all submissions and to afford a personal hearing with advance notice, and any authorities proposed to be relied on were to be shared in advance so that the assessee could meet them.

Conclusion: The notices were modified in the assessee's favour, the fraud-based s were removed, and the matter was sent for fresh adjudication after reply and hearing.

Final Conclusion: The proceedings were disposed of with procedural safeguards and relief to the assessee on the character of the notices, without any adjudication on the merits of the tax demand.

Ratio Decidendi: When a notice is converted from a fraud-based proceeding to an ordinary proceeding, the assessee must be given a fair opportunity to respond and be heard before a reasoned adjudication.

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