Best Judgment Assessment Void if Assessee Submits Pending Returns Post-Registration Restoration: Madras HC

Anand Cini Services Private Limited Vs State Tax Officer (ST) (Madras High Court)

Introduction: In a recent ruling, the Madras High Court, in the matter of Anand Cini Services (P.) Ltd. v. State Tax Officer, provided substantial relief to the petitioner, a registered taxpayer under the GST Act. The case revolved around the cancellation of GST registration due to unforeseen circumstances and subsequent best judgment assessment orders.

Background: The petitioner, engaged in leasing motion pictures and related equipment, and occasionally involved in film production, faced a setback when their GST consultant passed away due to Covid-19. Consequently, the petitioner could not file GST returns from 2019 onwards, leading to the cancellation of their registration on March 1, 2020. The cancellation order, dated March 11, 2020, became a pivotal point for the petitioner’s legal challenges.

Initiation of Proceedings: Amid the challenging circumstances, the State Tax Officer initiated assessment proceedings against the petitioner for an alleged violation of Section 6(2)(b) of the GST Act. Assessment notices for the years 2019-20 to 2022-23 were issued, and best judgment assessment orders were passed, taking into account the turnover before the cancellation of GST registration.

Unilateral Recovery Measures: The petitioner faced further adversity when recovery proceedings were initiated without prior intimation. The State Tax Officer attached the petitioner’s bank accounts on January 10, 2023, and another account on February 9, 2023, raising concerns about procedural fairness.

Legal Challenge: Challenging the best judgment assessment orders and the unilateral attachment of bank accounts, the petitioner filed writ petitions before the Madras High Court.

Court’s Consideration: The court took cognizance of the petitioner’s efforts to rectify the situation. Following the demise of the GST consultant, the petitioner applied for the revocation of the cancelled GST registration on April 22, 2023. Subsequently, the registration was restored by the Assistant Commissioner on April 28, 2023. The petitioner then filed GST returns for the default assessment years.

Court’s Decision: Considering the facts presented, the court held that the best judgment assessment orders, dated November 22, 2022, and November 25, 2022, were untenable. Since the petitioner had filed returns for the assessment years 2019-2020 to 2022-23 after the restoration of GST registration, the court set aside the impugned orders.

The Court also directed the respondents to conduct fresh assessment orders based on the returns filed by the petitioner for the mentioned assessment years. Consequently, the bank attachment order, dated February 20, 2023, was lifted in its entirety.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner is a registered tax payer under the GST Act and carrying on business of leasing out motion pictures, equipments, and occasionally, produces motion pictures. The petitioner has been regular in filing the GST returns and remitting taxes. While so, because of the sudden demise of their GST consultant due to covid, they were unable to file the GST returns from the year 2019 onwards and hence, their registration was cancelled with effect from 01.03.2020, by order dated 11.03.2020. Due to the outbreak of Covid-19 pandemic, the petitioner was unable to take immediate measures for restoration of his GST registration, however, in the interregnum period, the 1^st respondent initiated assessment proceedings against the petitioner for having violated the provisions of Section 6(2)(b) of the GST Act and subsequently, issued personal hearing notices for the Assessment Years 2019-20, 2020-21, 2021-22 and 2022-23 and passed the best judgment assessment orders by taking into account of the turnover reported prior to the cancellation of GST registration and initiated the recovery proceedings against the petitioner by attaching the petitioner’s Bank Account on 10.01.2023 and another Bank Account on 09.02.2023 without any prior intimation to the petitioner or raising any demand. Challenging the said best judgment assessment orders and the attachment orders passed by the respondents, the petitioner has filed the present writ petitions.

2. The learned counsel appearing for the petitioner would submit that the GST registration of the petitioner has been cancelled by the 1^st respondent with effect from 01.03.2020, by an order dated 11.03.2020, owing to which, the petitioner could not file his GST returns. Hence, the petitioner filed an application for revocation of his cancelled GST registration on 22.04.2023 and the said application was allowed, subsequently, the registration was restored by the 2^nd respondent, viz., Assistant Commissioner (ST), Pondy Bazaar Assessment Circle, Chennai – 28, by an order dated 28.04.2023. Thereafter, the petitioner has filed the GST returns for all the default Assessment Years mentioned above.

3.Therefore, the learned counsel would submit that, in the present case, the assessment orders have been passed on the basis of the best judgment assessment and in view of the fact that the petitioner filed the returns for the Assessment Years 2019-20 to 2022-23, subsequent to the restoration of the cancelled GST registration, the said impugned orders passed by the respondent has to be set aside and the consequential orders attaching the petitioner’s bank accounts have to be lifted. Therefore, the learned counsel appearing for the petitioner prayed for allowing all the writ petitions.

4. The learned Additional Advocate General appearing for the respondents by referring to the instructions at Para Nos. 2, 3, 4, 5 and 6 of the letter dated 02.12.2023 of the Assistant Commissioner (ST), Pondy Bazaar Assessment Circle, Chennai – 28 fairly submitted that since in the present case, the petitioner had filed returns for all the periods as mentioned above, the best judgment assessment orders passed by the 1st respondent has to be set aside and therefore, 1^st respondent may be directed to make fresh assessment based on the returns filed by the petitioner.

5. Heard the learned counsel appearing for the petitioner as well as the learned Additional Advocate General appearing for the respondents and perused the materials on record.

6. This Court is of the considered view that since the petitioner has filed the returns for the Assessment Years 2019-2020 to 2022-23 subsequent to restoration of GST Registration, the best judgment assessment orders passed by the 1^st respondent dated 22.11.2022 & 25.11.2022, which are under challenge in WP Nos.4675, 4676, 4677 and 4684 of 2023 are liable to be set aside and the 1^st respondent has to pass fresh assessment orders.

7. Accordingly, the Writ Petitions are allowed, the impugned orders are set aside and respondents are directed to pass fresh assessment orders, based on the returns filed by the petitioner for the Assessment Years 2019-2020 to 2022-23. Since the impugned best judgment assessment order is set aside, the consequential bank attachment order dated 20.02.2023 passed by the Assistant Commissioner (ST), Pondy Bazaar Assessment Circle, Chennai – 28, which is under challenge in WP No.7312 of 2023 is stand lifted to the entire extent. No costs. Consequently, connected Miscellaneous Petitions are closed.

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