Case Law Details
K. A. & Co. Vs State Tax Officer (Madras High Court)
The Madras High Court recently rendered a significant judgment in the case of K. A. & Co. vs State Tax Officer. The court scrutinized an order dated 29.12.2023, citing violations of natural justice and inadequate consideration. The petitioner challenged the order primarily on the grounds of non-receipt of the show cause notice (SCN), which was solely uploaded on the GST portal.
Upon inspection of the petitioner’s registered place of business in March 2023, proceedings commenced, leading to the issuance of an intimation and subsequently a show cause notice on 28.09.2023. However, crucially, the petitioner did not respond to the notice as it was solely uploaded on the GST portal’s “View Additional Notices and Orders” tab. The petitioner argued that this mode of communication was insufficient and failed to fulfill the principles of natural justice.
HC observed that The justification of the petitioner for not responding to the show cause notice is not convincing in as much as the petitioner is under an obligation to monitor the GST portal on an ongoing basis as a registered person.
Furthermore, the petitioner contended that the tax liability was inaccurately imposed based on the balance sheet for the financial year 2018-2019 instead of 2017-2018. The discrepancy resulted in an inflated taxable turnover, highlighting a clear error and lack of proper assessment by the tax authorities. Despite the availability of financial statements during the inspection, the respondent overlooked crucial evidence, indicating a failure to apply due diligence.
Although the government advocate asserted the petitioner’s awareness of the proceedings, citing partial acknowledgment and payment of dues, the petitioner’s argument emphasized the necessity of direct communication and adherence to procedural fairness.
Conclusion
The Madras High Court, acknowledging the petitioner’s grievances, set aside the impugned order. However, it imposed a condition requiring the petitioner to remit a specified sum towards the disputed tax demand as agreed, within a stipulated timeframe. Additionally, the court granted the petitioner an opportunity to respond to the show cause notice and directed the tax authorities to reevaluate the matter within a specified period, ensuring procedural fairness and compliance with principles of natural justice.
In conclusion, the judgment in K. A. & Co. vs State Tax Officer underscores the importance of transparent communication and diligent assessment procedures in tax matters, reaffirming the judiciary’s commitment to upholding fairness and due process.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 29.12.2023 is assailed both on the ground of breach of principles of natural justice and on the ground of non application of mind. Pursuant to an inspection at the registered place of business of the petitioner in March 2023, proceedings were initiated by issuing an intimation followed by a show cause notice dated 28.09.2023. The petitioner did not reply to the show cause notice because the notice was uploaded on the “View Additional Notices and Orders” tab on the GST portal and not communicated to the petitioner through any other mode.
2. Learned counsel for the petitioner referred to the impugned order and pointed out that tax liability was imposed with regard to non payment to creditors within 180 days by using the balance sheet for financial year 2018-2019 as the basis instead of the balance sheet for financial year 2017-2018. In this regard, she submits that the financial statements were made available to the respondent during the course of inspection. As a consequence of the patent error, she submits that the taxable turnover was taken as Rs.8,95,91,806/- instead of Rs.2,65,31,910/-. Even with regard to the other heads of the tax proposal, she submits that the impugned order indicates complete non application of mind.
3. Mr. V. Prashanth Kiran, learned Government Advocate, accepts notice for the respondent. He points out that the petitioner admitted liability and discharged dues in respect of two of the six issues specified in the intimation dated 14.09.2023. Consequently, he submits that the petitioner was aware of proceedings, but opted not to reply to the show cause notice or participate in proceedings pursuant thereto.
4. The petitioner has placed on record the balance sheets for the financial years ended 31.03.2018 and 31.03.2019. The amount payable by the petitioner to sundry creditors as on 31.03.2018 was a sum of Rs.2,65,31,910/-. For the financial year ended 31.03.2019, the amount payable to sundry creditors was Rs.8,95,91,806/-. It is unclear as to whether these balance sheets were placed before the respondent. Nonetheless, while undertaking adjudication for assessment period 2017-2018, it was incumbent on the respondent to call for and examine the financial statement for the year ended 31.03.2018 and not use the financial statement for year ended 31.03.2019 as the basis. To that extent,
5. Therefore, it is also necessary to put the petitioner on terms.
6. On instructions, learned counsel for the petitioner submits that the petitioner agrees to remit a sum of Rs.10,00,000/- as a condition for remand.
7. For reasons set out above, the impugned order dated 29.12.2023 is set aside on condition that the petitioner remits a sum of Rs.10,00,000/- (Rupees Ten lakhs only) towards the disputed tax demand as agreed to within a period of three weeks from the date of receipt of a copy of this order. The petitioner is permitted to submit a reply to the show cause notice within the aforesaid period. Upon receipt of the petitioner’s reply and upon being satisfied that the sum of Rs.10,00,000/-was received, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within a period of three months from the date of receipt of the petitioner’s reply.
8. The writ petition is disposed of on the above terms without any order as to costs. Consequently, connected miscellaneous petitions are closed.
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