Taxpayer Wins: Natural Justice Prevails as Procedural Fairness Trumps Arbitrary Tax Assessment Under Section 75(4)

HC upheld principles of natural justice in tax assessment, finding the Assistant Commissioner violated Section 75(4) of U.P. GST Act by denying oral hearing. The court set aside the original order, directing a fresh notice and hearing for the taxpayer within two weeks, emphasizing the mandatory requirement of providing a fair opportunity to be heard before passing an adverse assessment order.

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Issues:
Challenge to order passed by Assistant Commissioner for tax period 2018-19, denial of opportunity of oral hearing before Assessing Authority, interpretation of Section 75(4) of the U.P. GST Act, 2017, requirement of personal hearing before passing an adverse assessment order, adherence to principles of natural justice in assessment orders creating civil liability.

Analysis:
The petitioner challenged an order passed by the Assistant Commissioner for the tax period 2018-19, raising a demand in excess of Rs. 28,889. The main contention was the denial of an opportunity for oral hearing before the Assessing Authority. The petitioner argued that as per Section 75(4) of the U.P. GST Act, 2017, the Assessing Authority was obligated to provide a personal hearing before passing an adverse assessment order. Reference was made to a previous court decision and a Gujarat High Court case to support this argument.

The High Court examined Section 75(4) of the Act and agreed with the interpretation provided by a coordinate bench in a previous case. It was established that a person/assessee is not required to request a personal hearing; rather, it is mandatory for the Assessing Authority to provide this opportunity before making an adverse order. The court emphasized that in cases involving significant civil liability, ensuring a fair opportunity of hearing is essential as a principle of natural justice.

The court highlighted the importance of granting a genuine opportunity of hearing to uphold the rules of natural justice. It was noted that the impugned order was issued without proper hearing, leading to potential ambiguity in the assessee's response. Providing an opportunity for hearing not only upholds fairness but also enables the authority to make well-reasoned decisions that serve the interests of justice and facilitate better understanding at subsequent stages, including appeals.

Consequently, the High Court disposed of the writ petition, setting aside the order dated 19.04.2024. The matter was remitted back to the Assistant Commissioner to issue a fresh notice to the petitioner within two weeks, ensuring the petitioner's appearance for expeditious proceedings. This decision aimed to rectify the lack of opportunity for a personal hearing and uphold the principles of natural justice in the assessment process.

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