M/S Mahendra Educational PVT. LTD. Lko. Thru. Director Naveen Kumar Jain vs. State Of U.P. Thru. Prin. Secy. (Institutional Finance) Govt. Of U.P. Lko. And Another
Original PDF →Facts
M/s Mahendra Educational Pvt. Ltd. (the petitioner) challenged an order dated 26.07.2021 passed by the Deputy Commissioner, State Tax, Sector-14, Lucknow. This order raised a demand exceeding Rs. 4,51,52,992/- for the tax period 2021-22. The petitioner's primary contention was that the only notice issued on 13.04.2021, seeking a reply within 30 days, indicated "NA" against the columns for "Date of personal hearing," "Time of personal hearing," and "Venue where personal hearing will be held." This, the petitioner argued, amounted to a complete denial of an oral hearing before the Assessing Authority.
Held
The Court held that it was in complete agreement with the view taken in Bharat Mint & Allied Chemicals. It found that Section 75(4) of the U.P. GST Act, 2017, mandates an opportunity of hearing when an adverse decision is contemplated, and an assessee is not required to explicitly request it. The Court reasoned that the fact that the petitioner might have signified 'No' in a column meant for marking their choice to avail personal hearing would have no legal consequence if an adverse order was contemplated. The Court emphasized that in the context of an assessment order creating a significant civil liability, providing a minimal opportunity of hearing is mandatory under the principles of natural justice. Such an opportunity ensures that the authority passes a reasoned order and allows for better appreciation at subsequent stages. Therefore, the impugned order was set aside, and the matter was remitted to the Deputy Commissioner for issuing a fresh notice and concluding proceedings expeditiously after affording a proper hearing.
Key Issues
1. Whether the Assessing Authority was bound to afford an opportunity of personal hearing to the petitioner before passing an adverse assessment order, as contemplated under Section 75(4) of the U.P. GST Act, 2017, notwithstanding the petitioner's potential indication of not availing such hearing? Petitioner's arguments: The petitioner contended that Section 75(4) of the Act mandates an opportunity of hearing when an adverse decision is contemplated, irrespective of whether a formal request is made. They relied on the interpretation by a coordinate bench of the High Court in Bharat Mint & Allied Chemicals Vs. Commissioner Commerical Tax & 2 Ors. and a Gujarat High Court decision in M/S Hitech Sweet Water Technologies Pvt. Ltd. Vs. State of Gujarat. The petitioner argued that the "NA" endorsement effectively denied them a hearing, violating principles of natural justice and the law declared by this Court. Respondent's arguments: The judgment records no specific arguments from the respondent State.
Sections Cited
Section 75(4)
AI-generated summary — verify with the full judgment below
Neutral Citation No. - 2024:AHC-LKO:19871-DB Court No. - 2 Case :- WRIT TAX No. - 44 of 2024 Petitioner :- M/S Mahendra Educational Pvt. Ltd. Lko. Thru. Director Naveen Kumar Jain Respondent :- State Of U.P. Thru. Prin. Secy. (Institutional Finance) Govt. Of U.P. Lko. And Another Counsel for Petitioner :- Anurag Mishra Counsel for Respondent :- C.S.C. Hon'ble Vivek Chaudhary,J. Hon'ble Om Prakash Shukla,J.
Heard Sri Pranjal Shukla, learned counsel for the petitioner and learned Standing Counsel for State respondents.
Challenge has been raised to the order dated 26.07.2021 passed by the Deputy Commissioner, State Tax, Sector-14, Lucknow for the tax period 2021-22, whereby demand in excess to Rs.4,51,52,992/- has been raised against the present petitioner.
Solitary ground being pressed in the present petition is, the only notice in the proceedings was issued to the petitioner on 13.04.2021 seeking his reply within 30 days. Referring to item no. 3 of the table appended to that notice, it has been pointed out, the Assessing Authority had at that stage itself chosen to not give any opportunity of hearing to the petitioner by mentioning "NA" against column description "Date of personal hearing". Similar endorsements were made against the columns for "Time of personal hearing" and "Venue where personal hearing will be held". Thus, it is the objection of learned counsel for the petitioner, the petitioner was completely denied opportunity of oral hearing before the Assessing Authority.
Relying on Section 75(4) of the U.P. GST Act, 2017 (hereinafter referred to as the 'Act') as interpreted by a coordinate bench of this Court in Bharat Mint & Allied Chemicals Vs. Commissioner Commerical Tax & 2 Ors., (2022) 48 VLJ 325, it has been then asserted, the Assessing Authority was bound to afford
opportunity of personal hearing to the petitioner before he may have passed an adverse assessment order. Insofar as the assessment order has raised disputed demand of tax about Rs.19 lacs, the same is wholly adverse to the petitioner. In absence of opportunity of hearing afforded, the same is contrary to the law declared by this Court in Bharat Mint & Allied Chemicals (supra). Reliance has also been placed on a decision of the Gujarat High Court in M/S Hitech Sweet Section 75(4) of the Act reads as under : "An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person."
We find ourselves in complete agreement with the view taken by the coordinate bench in Bharat Mint & Allied Chemicals (supra). Once it has been laid down by way of a principle of law that a person/assessee is not required to request for "opportunity of personal hearing" and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order, the fact that the petitioner may have signified 'No' in the column meant to mark the assessee's choice to avail personal hearing, would bear no legal consequence.
Even otherwise in the context of an assessment order creating heavy civil liability, observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms. Here, we note, the impugned order itself has been passed on 26.07.2021. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter, the explanation furnished may be rejected and demand created.
Not only such opportunity would ensure observance of rules of natural of justice but it would allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the next/appeal stage, if required.
Accordingly, the present writ petition is allowed. The impugned order dated 26.07.2021 is set aside. The matter is remitted to the respondent no.2/Deputy Commissioner, State Tax, Sector-14, Lucknow to issue a fresh notice to the petitioner within a period of two weeks from today. The petitioner undertakes to appear before that authority on the next date fixed such that proceedings may be concluded, as expeditiously as possible. Order Date :- 5.3.2024 Arti/- [Om Prakash Shukla,J.] [Vivek Chaudhary,J.] ARTI MAURYA High Court of Judicature at Allahabad, Lucknow Bench
Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.