An appeal could not be made solely against penalty: Madras HC

Aatral Associates Vs State Tax Officer (Madras High Court)

In the case of Aatral Associates Vs State Tax Officer, the Madras High Court addressed the issue of whether a taxpayer can appeal solely against a penalty when the related tax has already been paid. The petitioner challenged the assessment order dated March 21, 2023, which included both tax and penalty. After receiving a show cause notice on February 20, 2023, the petitioner paid the tax but contested the penalty through an appeal. However, this appeal was dismissed by the second respondent on the grounds that an appeal could not be made solely against the penalty.

The High Court, upon reviewing the case, found the rejection of the appeal by the second respondent to be inappropriate. The petitioner had complied with tax payment and had only sought to appeal the penalty imposition. The court concluded that it was unjust for the appeal to be dismissed without consideration. Therefore, the court directed the second respondent to accept the appeal, mandate a fair hearing, and issue a decision based on the merits of the case. This ruling emphasizes the importance of allowing taxpayers to challenge penalties independently when the corresponding tax obligations are fulfilled.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

This writ petition has been filed challenging the impugned order dated 21.03.2023 passed by the 1^st respondent.

2. Mr. C. Harsha Raj, learned Additional Government Pleader, takes notice on behalf of the respondents. By consent of the parties, the main writ petition is taken up for disposal at the admission stage itself.

3. The learned counsel for the petitioner would submit that in the present case, the show cause notice dated 20.02.2023 was issued to the petitioner. Thereafter, the impugned assessment order dated 21.03.2023 was passed by the 1^st respondent, wherein the tax and penalty were imposed against the petitioner. Pursuant to the said impugned assessment order, only the tax amount was paid by the petitioner. With regard to the imposition of penalty, an appeal was filed by the petitioner. However, the said appeal was rejected, by the 2^nd respondent, as not maintainable. Hence, without any other option, this petition has been filed challenging the impugned assessment order passed by the 1st respondent.

4. In reply, the learned Additional Government Pleader appearing for the respondents would submit that the notice was issued to the petitioner and thereafter, the impugned order was passed by imposing tax and penalty. Subsequent to the said order, the tax was paid by the petitioner and the appeal was filed only against the penalty imposed by the respondents. Hence, he fairly requests this Court to issue appropriate direction to the 2^nd respondent to take the appeal on record.

5. Heard the learned counsel for the petitioner and the learned Additional Government Pleader for the respondents and also perused the materials available on record.

6. In the present case, though the show cause notice was issued and impugned assessment order was passed by imposing the tax and penalty, the petitioner has paid the tax and the challenge was made only against the penalty imposed by the respondents. However, the 2nd respondent has rejected the appeal filed by the petitioner on the ground that the penalty alone cannot be challenged. Therefore, this writ petition has been filed by the petitioner challenging the impugned order.

7. In view of the above, since the petitioner has already paid the entire tax amount and filed an appeal only against the penalty imposed by the respondents, it is not proper for the 2^nd respondent to reject the said appeal vide intimation dated 07.02.2024. Hence, this Court is inclined to direct the 2^nd respondent to take the appeal on record. Accordingly, this Court passes the following order:-

(i) The intimation dated 07.02.2024 issued by the 2^nd respondent is set aside.

(ii) The 2^nd respondent is directed to take the appeal on record and pass appropriate orders on merits and in accordance with law, after providing an sufficient opportunity to the petitioner, as expeditiously as possible.

8. With the above directions, this writ petition is disposed of. No costs. Consequently, the connected miscellaneous petitions are also closed.