2021 (4) TMI 654 - HC - VAT and Sales Tax

Validity of assessment order - opportunity of being heard prior to framing of an assessment or not - attachment of properties of the partners of the firm - recovery of arrears of tax and penalty due to the Government - HELD THAT - The proviso to Section 24(3) specifically requires that the dealer be afforded reasonable opportunity of being heard prior to framing of an assessment - Such reasonable opportunity, Courts have been consistently held, must include an opportunity of personal hearing. Admittedly, in the present case, the petitioner has not been heard personally prior to the impugned orders having been passed. The petitioner will appear before the respondent on Thursday, the 15th of April 2021 at 10.30 a.m without expecting or anticipating any further notice in this regard - Petition allowed.

Summary

Issues:
1. Premature attachment notices issued before the expiry of appeal period.
2. Violation of principles of natural justice due to lack of personal hearing before assessment.

Issue 1: Premature attachment notices issued before the expiry of appeal period.
The petitioner challenged two orders of assessment dated 18.01.2021 for the periods 2015-16 and 2016-17, along with notices for attachment dated 23.02.2021. The impugned notices were garnishee notices issued to prevent alienation of properties for arrears of tax and penalty under the Puducherry Value Added Tax Act, 2007. The High Court noted that the impugned notices for attachment were issued before the expiry of the appeal period, rendering them premature. The Court referred to a previous judgment where it was held that recovery actions should not be initiated until the time for filing a second appeal has expired. The Court directed the respondent to lift the attachment immediately, emphasizing that the taxpayer should have the full benefit of the appeal period before recovery actions can be initiated.

Issue 2: Violation of principles of natural justice due to lack of personal hearing before assessment.
The primary challenge to the orders of assessment was the violation of principles of natural justice, specifically the lack of personal hearing. The Court referred to Section 24(3) of the Act, which mandates that the dealer be given a reasonable opportunity of being heard before framing an assessment. It was highlighted that the reasonable opportunity must include a personal hearing, which was not provided to the petitioner in this case. Consequently, the impugned orders of assessment dated 18.01.2021 were set aside. The Court directed the petitioner to appear before the respondent for a personal hearing and ordered the assessment to be conducted de novo within four weeks from the first hearing. The Court also addressed the attachment of the petitioner's bank accounts, specifying that while the attachments would continue, no further amounts should be appropriated until the new assessment orders are passed.

In conclusion, the High Court found in favor of the petitioner on both issues, quashing the premature attachment notices and setting aside the orders of assessment due to the violation of principles of natural justice. The Court emphasized the importance of providing a full opportunity for appeal before initiating recovery actions and reiterated the requirement of a personal hearing before framing assessments to ensure procedural fairness.