2024 (8) TMI 1195 - HC - GST

Tax assessment order invalid due to premature passing before show cause notice response period expired

The AP HC allowed the petition finding violation of natural justice principles. The petitioner was issued a show cause notice on 26.12.2023 with 30 days ... Principles of natural justice - opportunity of hearing - show cause notice - assessment proceedings - remand for fresh consideration - recording of reasons in assessment orderPrinciples of natural justice - opportunity of hearing - show cause notice - Validity of the impugned assessment/order dated 24.01.2024 in view of alleged violation of principles of natural justice - HELD THAT: - The Court examined whether the order confirming demand dated 24.01.2024 complied with natural justice where a show cause notice dated 26.12.2023 had granted 30 days to the petitioner to respond. The petitioner's restoration of registration by the appellate authority on 22.01.2024 occurred shortly before the impugned order of 24.01.2024, and the petitioner had sought time to access departmental portals and file detailed objections. The Court held that principles of natural justice require the affected person to be informed of the case against them, be furnished the material intended to be relied upon, and be given adequate time to gather and present material in response. Passing the assessment order before the expiry of the 30-day period and without giving the petitioner a realistic opportunity to access records and file objections amounted to a violation of these principles. The Court also recorded that correspondence and attendance on dates not specified in the show cause notice could not be treated as compliance with the opportunity of personal hearing stipulated in the notice. [Paras 12, 13, 14]Impugned order dated 24.01.2024 is invalid for breach of principles of natural justice and is set aside.Assessment proceedings - remand for fresh consideration - recording of reasons in assessment order - Consequent direction on further proceedings following setting aside of the impugned order - HELD THAT: - Having set aside the assessment/order for violation of natural justice, the Court permitted the 2nd respondent to undertake fresh assessment proceedings but mandated procedural safeguards. The Court directed that the 2nd respondent may proceed on the basis of the existing show cause notice dated 26.12.2023, only after granting the petitioner two weeks' time from the date of the order to file objections. Thereafter a personal hearing is to be afforded. The Court further required that any subsequent assessment and penalty order must set out reasons. These directions amount to a remand for fresh consideration subject to specified procedural protections rather than a final adjudication on the merits of the tax demand. [Paras 15]Assessment proceedings set aside and remitted for fresh consideration with directions to grant two weeks to file objections, to hold a personal hearing, and to record reasons in any subsequent assessment.Final Conclusion: Writ petition allowed; the impugned assessment/penalty order dated 24.01.2024 is set aside for violation of natural justice and the tax authority is permitted to proceed afresh on the show cause notice dated 26.12.2023 after giving the petitioner two weeks to file objections, granting a personal hearing, and recording reasons in any subsequent assessment. Issues:Violation of principles of natural justice in tax assessment proceedings.Analysis:The petitioner, a registered taxpayer under CGST and APGST Acts, had their registration cancelled, which was later revoked through an appeal. However, during the restoration process, the tax department issued a notice under the APGST Act regarding discrepancies in tax filings. Subsequently, a show cause notice was issued demanding a significant amount from the petitioner, who requested time for a detailed response and restoration of registration. The tax department passed an order confirming the demand, prompting the petitioner to challenge it in a writ petition, alleging a violation of natural justice principles.The petitioner argued that the order suffered from various flaws, including premature issuance before the response deadline and misinterpretation of the petitioner's letter as a response to the show cause notice. Additionally, discrepancies in the dates for personal hearing were highlighted, questioning the fairness of the proceedings. On the other hand, the Government Pleader contended that the petitioner failed to respond to the show cause notice intentionally, impacting their eligibility for relief.The Court emphasized the importance of adhering to natural justice principles, ensuring the affected party has sufficient opportunity to present their case and gather relevant material for defense. In this case, the assessment order was issued before the petitioner could access necessary information post-registration restoration. This premature action was deemed a violation of natural justice, rendering the order invalid.Consequently, the writ petition was allowed, setting aside the penalty proceedings and instructing the tax department to conduct assessment proceedings based on the show cause notice, granting the petitioner two weeks to respond and arranging a personal hearing. The assessment order must provide reasons, and costs were not awarded. Pending applications were to be closed as a result of the judgment.