2015 (11) TMI 1142 - HC - VAT and Sales Tax

Validity of assessment order - Violation of principle of natural justice - Best judgment assessment - Held that - a mere perusal of order would indicate that after serving a notice to the petitioner, intimating him of the proposal to complete the assessment for the assessment year on best judgment basis, the respondent assessing authority proceeded to pass orders on the very next day, thereby rendering the very purpose of the notice meaningless. Ext. P4 order is vitiated by a non-compliance with the rules of natural justice and I quash the same. The respondent assessing authority shall complete the assessment in relation to the petitioner afresh, after affording him an opportunity of hearing in accordance with the directions in this judgment. The fresh order of assessment shall be passed within a period of one month from the date of receipt of a copy of this judgment. - Decided in favour of assessee.

Summary

Issues involved:
Challenge against assessment order passed under KVAT Act on best judgment basis without affording effective opportunity to the petitioner.

Analysis:
The writ petition challenges Ext.P4 order of assessment finalizing the petitioner's assessment under the KVAT Act on best judgment basis for a specific period. The petitioner's main contention is the lack of opportunity to show cause against the assessment proposal. The High Court acknowledges frequent challenges to assessment orders under taxing statutes and emphasizes the importance of considering objections raised by assesses before finalizing assessments. The KVAT Act expects self-assessment by the assessee unless discrepancies are found, leading to assessment on best judgment basis. The statutory provisions outline the procedure for rejecting defective returns, issuing notices, and granting opportunities for rectification before resorting to best judgment assessment under Section 25 of the KVAT Act.

The court notes the necessity for a reasonable and meaningful opportunity for the assessee to respond to the proposed best judgment assessment. It highlights the importance of granting sufficient time, not less than 7 days, for the assessee to present objections and documents. Despite previous court decisions deprecating unfair practices by revenue authorities, such as issuing composite notices, the authorities continue to follow arbitrary procedures. In the present case, the court finds Ext.P4 order non-compliant with natural justice principles, quashing it, and directing a fresh assessment with a proper opportunity for the petitioner to be heard within a month.

Furthermore, the judgment emphasizes the negative perception of tax authorities and the need for a fair, honest, and efficient tax administration to reduce litigation and ensure public satisfaction. The court directs the tax authorities to consider the observations in the judgment and issue appropriate circulars for compliance with procedural requirements under the KVAT Act. This directive aims to improve tax administration, reduce disputes, and enhance public trust in the taxation system.