Case Law Details
K.R. Contractor Vs Deputy State Tax Officer – II (Madras High Court)
Introduction: In a recent case before the Madras High Court, the issue of an assessment order passed without a personal hearing was brought into question. The court found that such actions violated principles of natural justice, leading to the order being squashed.
Detailed Analysis: The case, K.R. Contractor Vs Deputy State Tax Officer – II, involved a civil contractor registered under GST statutes. After scrutiny of the petitioner’s returns, a notice was issued alleging discrepancies. Despite the petitioner’s reply, a show cause notice was issued without a personal hearing, leading to an assessment order being passed.
The petitioner argued that no personal hearing was granted, hindering their ability to explain discrepancies. The court noted that while a show cause notice was issued, the petitioner was not afforded a personal hearing, a crucial aspect of natural justice.
The assessment order relied heavily on Form 26AS, disregarding the petitioner’s objections regarding receipts from the pre-GST period. The court observed that justice demanded the petitioner be heard to explain their position adequately.
Conclusion: Ultimately, the Madras High Court quashed the assessment order, emphasizing the importance of affording parties a fair hearing. The assessing officer was directed to provide the petitioner with a reasonable opportunity, including a personal hearing, before issuing a fresh assessment order. This case serves as a reminder of the significance of adhering to principles of natural justice in administrative proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An assessment order dated 18.12.2023 is under challenge in this writ petition. The petitioner is a civil contractor and a registered person under applicable GST statutes. Upon scrutiny of returns filed by the petitioner, a notice in Form ASMT-10 was issued alleging discrepancies in such returns. The said notice was replied to in July 2023. Thereafter, a show cause notice was issued to the petitioner in August 2023. Such show cause notice was replied to by the petitioner and the petitioner also enclosed documents along with such reply. The impugned assessment order was issued thereafter in December 2023.
2. Learned counsel for the petitioner invited my attention to the impugned assessment order and pointed out that the assessing officer concluded that the entire receipts shown in the profit and loss account for the year ended 31.08.2018 are attributable to the GST period. He points out that conclusions were drawn on the basis of Form 22AS and receipts reflected therein. By referring to the discussion in the assessment order of the petitioner’s response to the show cause notice, he pointed out that the petitioner stated that Form 26AS is only a statement that provides details of receipts in respect of which TDS or TCS was deducted and that it cannot be construed as the taxable turn over of such person.
3. With reference to the reply issued by the petitioner, he pointed out that the petitioner had submitted documents such as the audited profit and loss account and balance sheet, audit report in Form 3CD, Form 26AS and GSTR 1, 2A and 2B. By contending that no personal hearing was granted, learned counsel submits that if a personal hearing had been granted, the petitioner would have been able to explain the facts and persuade to the assessing officer with regard to the discrepancy between Form 26AS and the petitioner’s returns. Learned counsel also submits that the assessment proceedings are barred by limitation. On instructions and without prejudice, learned counsel submits that the petitioner is willing to remit 10% of the disputed tax demand as a condition for remand.
4. Mrs. K.Vasanthamala, learned Government Advocate, accepts notice for the respondent. By referring to the impugned order, she points out that principles of natural justice were adhered to by issuing a show cause notice and by also considering the petitioner’s reply thereto. She further points out that a personal hearing was offered to the petitioner under the show cause notice and that the petitioner failed to avail of such opportunity.
5. The documents on record clearly indicate that the assessment order was preceded by a show cause notice, which indicates that a personal hearing was offered. However, the assessment order also discloses that the petitioner was not heard. The petitioner is a civil works contractor and it is quite common for such civil work contractors to receive payments in the form of mobilization advances and against running account bills. The operative portion of the impugned assessment order clearly indicates that the tax liability was confirmed by disregarding the objections of the petitioner that the receipts in Form 26AS pertain to the pre-GST period. The relevant Form 26AS is on record and prima facie indicates that some of the receipts pertain to the pre-GST periods. In these circumstances, the interest of justice demands that the petitioner should be heard. Solely for this reason, the impugned assessment order warrants interference, albeit by putting the petitioner on terms.
6. Accordingly, the impugned assessment order is quashed subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to within a maximum period of two weeks from the date of receipt of a copy of this order. Subject to being satisfied that 10% of the disputed tax demand was received, the assessing officer is directed to provide a reasonable opportunity, including a personal hearing, and thereafter issue a fresh assessment order in accordance with law within a maximum period of two months
7. W.P.No.5644 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.6239 and 6242 of 2024 are closed.
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