Ex-parte assessment order passed in violation of the principles of natural justice entails civil consequences

[CA Bimal Jain]

The Hon’ble Patna High Court in M/S. BALRAM SINGH VERSUS UNION OF INDIA AND OTHERS - 2023 (2) TMI 1086 - PATNA HIGH COURT quashed and set aside the ex-parte assessment order passed by the Revenue Department rejecting the Input Tax Credit (“ITC”) claim of the assessee and imposing the tax liability of INR 10,06,826/- , on the grounds that it was passed in violation of the principles of natural justice without providing opportunity of hearing or sufficient time to the assessee to represent its case, which entails civil consequences. Held that, opportunity of hearing shall be afforded to the assessee to place on record all essential documents and materials.

Facts:

This petition has been filed by M/s Balram Singh (“the Petitioner”) challenging the ex parte summary assessment orders dated February 16, 2020 and February 18, 2020 (“the Impugned Orders”) passed by the Revenue Department (“the Respondent”) for the period October 2018 to March 2019 wherein, ITC claim of the Petitioner was rejected and tax amounting to INR 10,06,826/- including penalty/interest was imposed without providing any further notice to the Petitioner. Further, the Respondent seized INR 20,00,000/- from the cash credit ledger of the Petitioner by way of recovery against the total liability.

Issue:

Whether the Impugned Orders passed by the Respondent are in violation of principles of natural justice?

Held:

The Hon’ble Patna High Court in M/S. BALRAM SINGH VERSUS UNION OF INDIA AND OTHERS - 2023 (2) TMI 1086 - PATNA HIGH COURT held as under:

• Opined that, the Impugned Order is bad in law on the grounds of violation of principles of natural justice, as no fair opportunity of hearing or sufficient time was not afforded to the Petitioner to represent its case and the Impugned Order being ex parte in nature, does not assign any sufficient reasons by the Respondent for determining the amount due and payable by the Petitioner.
• Held that, the ex parte Impugned Order passed in violation of the principles of natural justice, entails civil consequences and opportunity of hearing shall be afforded to the Petitioner to place on record all essential documents and materials.
• Set aside the Impugned Orders with a direction to Petitioner to deposit 20% of the amount of the demand raised, before the Respondent within four weeks. Further stated that, if it is ultimately found that the Petitioner’s deposit is in excess, the same shall be refunded within two months from the date of passing of the order.
• Directed the Respondent, to de-freeze/ de-attach the bank account(s) of the Petitioner, if attached in reference to the proceedings and to decide the case on merits after complying with the principles of natural justice and not to take any coercive steps against the Petitioner during pendency of the case.
• Further directed the Petitioner, to fully cooperate in proceedings and not to take unnecessary adjournment.
• Further directed the Respondent to decide the case on merits within a period of two months and shall pass a speaking order, assigning reasons, which can be challenged by the Petitioner, if required and desired.

(Author can be reached at [email protected])