Violation of natural justice in tax assessment quashed; fresh adjudication ordered subject to 50% pre-deposit and reply within 30 days

Violation of principles of natural justice found in an ex parte tax assessment; the impugned ex parte assessment order is quashed and the matter remitted for fresh adjudication. The remittance is conditional on the taxpayer depositing 50% of the disputed tax within 30 days and filing a reply to the show cause notice with supporting documents, treating the ex parte order as an addendum. Where overlap exists with a prior demand, the taxpayer may explain and make a corresponding pre-deposit within 30 days. Upon compliance, the assessing authority must decide on merits expeditiously and the bank attachment will be vacated.

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Issues: (i) Whether the ex parte assessment order dated 26.02.2024 confirming a demand of Rs.63,69,524/- based on alleged mismatch in auto-populated Input Tax Credit is sustainable, and whether the order should be quashed and the matter remitted for fresh consideration subject to conditions including a pre-deposit and filing of a reply to the show cause notice.

Analysis: The proceedings arose from a show cause notice in Form DRC-01 dated 01.09.2023 and an ex parte assessment order dated 26.02.2024 confirming the demand. There is an earlier assessment order dated 15.05.2023 for the same tax period against which an appeal was filed and payments were made. The impugned order was passed without the petitioner filing a reply to the show cause notice. The remedial steps ordered involve quashing the ex parte order, permitting the petitioner to file a reply and produce documents, requiring a pre-deposit of 50% of the disputed tax within a specified period, and remitting the matter to the assessing authority to pass a fresh order on merits after giving notice and considering the petitioners submissions. Provisions for addressing any overlap between the earlier order and the impugned order and for vacation of bank attachment upon compliance were incorporated into the conditional relief.

Conclusion: The ex parte assessment order dated 26.02.2024 is quashed and the matter is remitted to the assessing authority to pass a fresh order on merits subject to the petitioner depositing 50% of the disputed tax within 30 days and filing a reply to the show cause notice; on compliance, the bank attachment shall be vacated and the authority shall decide the matter expeditiously.

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