M/S Shanti Construction And Co. vs. The State Of Bihar

Facts

M/s Shanti Construction and Co. (the petitioner) filed a writ petition before the Patna High Court challenging a Demand cum Show Cause Notice dated April 15, 2021, issued by the Revenue. The petitioner contended that the Revenue failed to adhere to a stipulated time frame for initiating show cause proceedings as per a circular, and that the notice pre-determined the amount due. The Revenue, through the Additional Solicitor General, clarified that the notice was merely a show cause notice, not an adjudication, and that the petitioner was being asked to explain why an alleged suppressed income of ₹6,06,24,604/- should not be assessed. The petitioner was directed to respond to the notice and present all evidence and arguments before the appropriate authority.

Held

The Court held that the petitioner's contention regarding the circular's mandatory nature could be raised before the appropriate authority. If the authority found the circular to be mandatory, the Demand cum Show Cause Notice would be recalled or appropriate action taken. Regarding the second issue, the Court found that the petitioner was misreading the notice. It was clarified that the notice was a show cause notice, not an adjudication, and it afforded the petitioner an opportunity to explain the alleged suppressed income. The Court directed the petitioner to respond to the show cause notice, presenting all material evidence and pleas, including those raised in the writ petition. The appropriate authority was directed to afford an adequate opportunity of hearing and pass a reasoned and speaking order after considering all materials. The Court explicitly stated that it had not expressed any opinion on the merits of the case, leaving all issues of fact and law open.

Key Issues

1. Whether the Demand cum Show Cause Notice dated April 15, 2021, issued by the Revenue is invalid for non-adherence to a circular stipulating a time frame for initiating show cause proceedings? 2. Whether the Demand cum Show Cause Notice dated April 15, 2021, has pre-determined the amount due from the petitioner, thereby violating principles of natural justice? Petitioner's Arguments: The petitioner argued that the Revenue failed to follow a mandatory circular regarding the time frame for issuing show cause notices. Additionally, the petitioner contended that the notice itself indicated a pre-determination of the liability, rendering it invalid. Revenue's Arguments: The Revenue, represented by the Additional Solicitor General, argued that the petitioner was misinterpreting the "Demand Cum Show Cause Notice." It was clarified that the notice was solely a show cause notice, affording the petitioner an opportunity to respond and present evidence regarding the alleged suppressed income of ₹6,06,24,604/-, and that no amount had been adjudicated at that stage.