The Allahabad High Court recently cancelled a tax assessment and subsequent decisions made against a company. This action was taken because the tax authorities had failed to properly notify the company before making the assessment, which is required by law.
M/S Xestion Advisor Private Limited, the applicant’s company, is in the management consultancy services approach the court contesting the assessment order on 21.09.2020 and the appellate order on 12.06.2024.
The counsel of the applicant claimed that the order of assessment under Form DRC-07 was passed by the authorities dated 21.09.2020 for failure to submit GSTR-3B returns on time.
U/s 46, the notice, which calls upon the taxpayer to file the return within 15 days, was uploaded only on 25.09.2020, four days after the assessment order had already been passed.
It makes the applicant deprived of the statutory opportunity to comply, and the filing has been rectified, breaching both the procedural safeguards under the GST Act and the principles of natural justice.
The impugned orders have been defended by the State through its Additional Chief Standing Counsel, though post-analysing the records, HC marked that the demand order u/s 62 for ₹19.8 lakhs had been passed prematurely, without complying with the due process mandated u/s 46.
The Court discovered that both the assessing and appellate authorities had been unable to address this fundamental procedural lapse.
The Allahabad High Court laid on the decision of the Jharkhand High Court about Vinman Constructions Limited v. State of Jharkhand (2022), where a similar demand order was set aside for non-issuance of the requisite notice. The Allahabad High Court said that these procedural breaches, which result in financial and penal consequences, cannot be sustained under law.
The court said that “The record clearly shows that the assessment order under section 62 of the GST Act suffers from a serious lacuna due to non-issuance of notice under section 46 of the GST Act. Even the appellate court has failed to take note of the said fact. Therefore, the impugned orders suffer from a serious infirmity for non-compliance of the principles of natural justice and procedural requirements prescribed under the Statute in the absence of proper service on the petitioner.”
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The bench of Justice Piyush Agarwal thereafter quashed both the original assessment order and the appellate order, remitting the case back to the Deputy Commissioner, State Tax, Noida, with directives to allocate a fresh notice u/s 46 within 2 weeks.
On the next specified date, the applicant was asked to appear before the tax authority so that the proceedings could be concluded. The court said that during the case pendency, any amount deposited shall stay within the consequences of the fresh proceedings.
| Case Title | M/S Xestion Advisor Private Limited. Vs. Additional Commissioner Grade II and Another |
| Citation | WRIT TAX No. – 1465 of 2024 |
| Counsel For Appellant | Harsh Vardhan Gupta |
| Counsel For Respondent | C.S.C. |
| Allahabad High Court | Read Order |
