M/S Mohini Traders vs. State Of U.P. And Another
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The petitioner, M/s Mohini Traders, challenged an order dated 21.10.2022 (later corrected to 25.11.2022 in paragraph 8 and 10) passed by the Assistant Commissioner, State Tax, Aligarh. This order raised a demand exceeding Rs. 5 crores for the tax period April 2018. The petitioner's primary contention was that they were denied an oral hearing. The notice issued on 20.05.2022 indicated 'NA' against the columns for the date, time, and venue of the personal hearing. The revenue argued that the petitioner had opted out of a personal hearing by marking 'No' in the online reply to the show-cause notice.
Held
The Court held that Section 75(4) of the U.P. GST Act, 2017, mandates an opportunity of hearing where an adverse decision is contemplated, and an assessee is not required to explicitly request it. The Court agreed with the coordinate bench's interpretation in Bharat Mint & Allied Chemicals (supra) that it is mandatory for the Assessing Authority to afford a personal hearing before passing an adverse order. The petitioner's act of marking 'No' for personal hearing in the online reply was deemed to have no legal consequence in light of this mandatory provision. The Court emphasized that observing a minimal opportunity of hearing is a must, especially when creating a heavy civil liability, to adhere to the principles of natural justice. The impugned order was set aside because the opportunity of hearing was not granted in real terms. The matter was remitted to the Assistant Commissioner for a fresh notice and conclusion of proceedings expeditiously.
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, notwithstanding the petitioner's online indication of not availing such hearing, under Section 75(4) of the U.P. GST Act, 2017? The petitioner argued that Section 75(4) of the Act, as interpreted in Bharat Mint & Allied Chemicals (supra) and M/s Hitech Sweet Water Technologies Pvt. Ltd. (supra), mandates a personal hearing before any adverse order is passed, irrespective of the assessee's request. They contended that the 'NA' endorsement in the notice clearly denied them this opportunity, rendering the assessment order contrary to law and principles of natural justice. The revenue contended that the petitioner had explicitly declined the opportunity for a personal hearing by selecting 'No' in the online reply to the show-cause notice. Therefore, they could not subsequently claim an error in the order based on the denial of a hearing they had waived.
Sections Cited
Section 75(4)
AI-generated summary — verify with the full judgment below
Chief Justice's Court Case :- WRIT TAX No. - 551 of 2023 Petitioner :- M/S Mohini Traders Respondent :- State of U.P. and Another Counsel for Petitioner :- Vishwjit Counsel for Respondent :- C.S.C Hon'ble Pritinker Diwaker,Chief Justice Hon'ble Saumitra Dayal Singh,J.
Heard Sri Vishwjit, learned counsel for the assessee and Sri Ankur Agarwal, learned counsel for the revenue.
Challenge has been raised to the order dated 21.10.2022 passed by the Assistant Commissioner, State Tax, Sector-6, Aligarh for the tax period April 2018, whereby demand in excess to Rs. 5 crores 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 20.05.2022 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. 6 crores, 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 he had tick marked the option 'No' against the option for personal hearing (in the reply to the show-cause-notice), submitted through online mode. Having thus declined the opportunity of hearing, the petitioner cannot turn around to claim any error in the impugned order passed consequently.
Having hearing learned counsel for the parties and having perused the record, 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 25.11.2022, while reply to the show-cause- notice had been entertained on 14.11.2022. 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 25.11.2022 is set aside. The matter is remitted to the respondent no.2/Assistant Commissioner, State Tax, Sector-6, Aligarh 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 :- 3.5.2023 Prakhar (S. D. Singh, J.) (Pritinker Diwaker, C.J.) PRAKHAR SRIVASTAVA High Court of Judicature at Allahabad
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.