AP HC Sets Aside Tax Assessment Due to Non-Disclosure of Yield Benchmark

Lohlya Edible Oils Private Limited Vs State of Andhra Pradesh (Andhra Pradesh High Court)

The Andhra Pradesh High Court disposed of a batch of writ petitions challenging assessment orders passed against a company engaged in importing crude edible oil and refining it for sale. The petitions related to the assessment years 2021-2022, 2022-2023, and 2023-2024.

The Assessing Authority initiated proceedings on the basis that the standard yield of refined oil from crude oil should be 94.5%. However, the petitioner’s recorded yields were higher, namely 96.79% for 2021-2022, 94.86% for 2022-2023, and 95.43% for 2023-2024. The Assessing Officer held that any yield beyond 94.5% could not be accepted and treated the excess yield as taxable.

The petitioner challenged the assessment orders mainly on the ground of violation of the principles of natural justice. According to the petitioner, after receiving the initial notice, it repeatedly requested the Assessing Officer to disclose the basis and source for fixing the benchmark yield at 94.5%. The petitioner relied on letters dated 28.05.2025, 19.06.2025, and 23.08.2025, along with written objections submitted during the personal hearing on 13.10.2025, to show that such requests were consistently raised.

The Court observed that some assessment orders did not refer to the letters dated 28.05.2025 and 23.08.2025. However, the subsequent representation dated 19.06.2025 specifically referred to the earlier request. The Court also noted that additional submissions during the personal hearing mentioned the same issue.

After examining the record, the High Court held that the petitioner had indeed sought information regarding the source and basis for fixing the benchmark yield of 94.5%. The Court found that the record did not disclose any reply from the Assessing Officer to these requests.

The Court concluded that the petitioner was denied an adequate opportunity of hearing because the material relied upon by the Assessing Officer for initiating the assessment proceedings was not supplied to the petitioner.

Accordingly, the High Court allowed the writ petitions and set aside the assessment orders for all the relevant assessment years. The matters were remanded back to the Assessing Officer with directions to disclose the source of information and details forming the basis for fixing the standard yield at 94.5%. The petitioner was granted liberty to file objections to the benchmark and other issues thereafter. The Assessing Officer was directed to pass fresh orders after providing adequate opportunity to the petitioner. No order as to costs was made.

FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT

As the issues raised in these Writ Petitions are one and the same, they are being disposed of, by way of this Common Order.

2. Heard Mrs. Aparna Nandakumar, the learned counsel appearing on behalf of Sri Singamsetty V. M. Sankar, the learned counsel for the petitioner and Sri S. A. V. Sai Kumar, the learned Government Pleader for Commercial Taxes, appearing for the respondents.

3. The petitioner is involved in the business of importing crude edible oil and refining the same for sale. The premises of the petitioner were subjected to inspection, after which proceedings were initiated for assessment. The details of the years of assessment and the dates of orders of assessment are given herein below.

4. All these orders are sought to be challenged by the petitioner, on the ground that, the said orders suffered from violation of Principles of Natural Justice.

5. The Assessing Authority had initiated proceedings, on the ground that, the standard yield of refined oil from the crude oil would be 94.5%. However, the yield obtained by the petitioner, for the following years, is as follows:

6. The Assessing Officer took the view that, the claim of the petitioner beyond yield of 94.5%, cannot be accepted and the excess yield would have to be treated as taxable.

7. The petitioner has approached this Court with the contention that, the petitioner, upon receiving the initial notice, regarding this aspect, had sought information from the Assessing Officer as to how the Assessing Officer, had arrived, at the bench mark of 94.5% and the same had not been answered by the Assessing Officer at any stage. The petitioner relies upon the letters sent by the petitioner, on 28.05.2025, 19.06.2025 & 23.08.2025 and the written objections filed, as part of the personal hearing held, on 13.10.2025, to contend that this issue was raised but was not answered by the Assessing Officer.

8. The impugned orders of assessment do not contain any reference to the letters, dated 28.05.2025 & 23.08.2025, in some of the assessment orders. However, the letter, dated 28.05.2025, has specifically been referred to in the subsequent representation, dated 19.06.2025. Similarly, additional submissions, as part of the personal hearing also referred to this request.

9. In these circumstances, it must be held that the petitioner had made a request for the said information and the source, on the basis of which such a bench mark is being fixed. The record does not disclose any reply by the Assessing Officer, to such an enquiry.

10. In such circumstances, it must be held that the petitioner did not get an appropriate opportunity of hearing as the material, on the basis of which the Assessing Officer had initiated assessment was not given to the petitioner.

11. Accordingly, these Writ Petitions are allowed, setting aside the aforesaid orders of assessment, for the assessment years, mentioned in the above table and the assessments are remanded back to the Assessing Officer to set out the source of information and the details of the information, on the basis of which a standard yield of 94.5% was fixed. Thereafter, the petitioner is entitled to file it’s objections to the said benchmark as well as any other issue. The Assessing Officer shall pass orders after adequate opportunity is given to the petitioner.

There shall be no order as to costs.

As a sequel, pending miscellaneous applications, if any, shall stand closed.