Stone Mining Firm Wins Tax Challenge: Procedural Flaws Invalidate Assessment, Ordered Rehearing with Partial Deposit Required

HC quashed tax assessment orders against a stone mining partnership firm due to procedural irregularities. The court remanded the case, directing the petitioner to deposit 10% of disputed tax and allowing a personal hearing. The assessing officer must issue fresh assessment orders within two months, emphasizing principles of natural justice in tax proceedings.

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Issues:
Challenging assessment orders on grounds of breach of natural justice.

Analysis:
The petitioner, a partnership firm engaged in stone mining, delegated GST compliance to an accountant and claimed unawareness of the assessment orders until March 2024, prompting the writ petitions. The main issue concerns the mismatch between GSTR 3B and auto-populated GSTR 2A returns. The petitioner argued lack of prior notice and referenced Circular No. 183 for procedures on such discrepancies, emphasizing the absence of a detailed show cause notice.

The Government Advocate countered, asserting that the petitioner had adequate opportunity, evidenced by Form ASMT-10 and preceding intimation notices. He emphasized the taxpayer's duty to prove entitlement to Input Tax Credit (ITC), which the petitioner allegedly failed to fulfill. Following this, the petitioner agreed to remit 10% of the disputed tax demand for each assessment period as a remand condition.

The court acknowledged the mismatch issue and Circular No. 183's relevance. Despite the petitioner's non-participation in assessment proceedings, a Chartered Accountant's certificate explaining the disparity was submitted. Consequently, the court quashed the assessment orders, remanding both petitions for reconsideration with the condition of remitting 10% of the disputed tax demand within 15 days. The petitioner could respond to the show cause notice within this period, and upon satisfaction of the remittance, the assessing officer was directed to allow a personal hearing and issue fresh assessment orders within two months, lifting the bank attachment.

In conclusion, both writ petitions were disposed of with no costs, and connected miscellaneous petitions were closed, emphasizing the importance of natural justice and procedural fairness in tax assessments.

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