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Madras High Court Sets Aside Assessment Order for Exceeding Scope of Initial Notice

Introduction

In the judgement, Aristo Telemedia Private Limited v. Assistant Commissioner (ST)[i], delivered by the Madras High Court (‘MHC’), MHC examined a case that highlighted the complexities and potential unfairness faced by taxpayers. The case, marked by an assessment order dated 30.12.2023 (‘Impugned Order’), delves into the intricate interplay between procedural regularity and substantive justice. With a show cause notice (‘SCN’) initially demanding Rs.39,34,549, the petitioners were thrust into a legal battle, contesting not only the quantum of liability but also the fundamental procedural safeguards enshrined in the legal framework.

Brief Facts

  • The petitioner filed the writ petition challenging the Impugned Order.

  • The petitioner received an SCN dated 30.05.2023 demanding Rs.39,34,549 towards tax and reversal of input tax credit (‘ITC’) which was responded to by the petitioner on 12.08.2023. Eventually, the Impugned Order was issued.

  • The petitioner challenged the Impugned Order on multiple grounds, including the substantial increase in the tax liability from Rs. 39,34,549 to Rs. 1,08,47,012.

  • The discrepancy arose mainly due to the inclusion of ‘other expenses’ from the petitioner’s profit and loss account.

  • The petitioner was not provided an opportunity to be heard before the issuance of the Impugned Order.


Held

  • The MHC set aside the Impugned Order, nullifying its legal effect, and remanded the matter back to the Respondent for reconsideration.

  • The MHC noted the discrepancy between the demand specified in the SCN and the tax liability imposed in the Impugned Order. It observed that the petitioner was deprived of an opportunity to contest the increased liability.

  • It was found that the inclusion of Rs.48,53,977 from the profit and loss account as tax liability was erroneous. Additionally, the MHC highlighted the absence of a personal hearing for the petitioner.

  • The respondent was directed to provide a reasonable opportunity, including a personal hearing, and issue a fresh order within two months. All contentions were left open to the petitioner during the remanded proceedings.


Our Analysis

This judgment underscores the importance of adherence to statutory requirements in GST assessment. The MHC ruled in favour of the Petitioner, which not only provides relief to the Petitioner but also ensures a fair opportunity to contest the tax liability. The case underscores the critical need for precision in the application of tax laws and reinforces the principle of fairness in taxation, safeguarding individuals against arbitrary actions by tax authorities. This decision serves as a pivotal legal precedent, illuminating the complexities associated with tax demand and emphasizing the essential need for strict adherence to jurisdictional principles.




End Note

[i]W.P. No. 9067 of 2024 dated 04.04.2024




Authored by Onam Singhal, Chartered Accountant at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.

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