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 25.11.2022 passed by the Assistant Commissioner, State Tax, Aligarh. This order raised a demand exceeding Rs. 3 crores for the tax period of April 2018. The petitioner's sole contention was that they were denied an opportunity of oral hearing. The notice issued on 21.10.2022 indicated 'NA' against the columns for the date, time, and venue of personal hearing, effectively precluding any oral hearing. The petitioner argued this violated principles of natural justice and Section 75(4) of the U.P. GST Act, 2017, citing previous High Court judgments. The revenue contended that the petitioner had opted out of a personal hearing by marking 'No' to the option for personal hearing in their online reply to the show-cause notice.
Held
The Court held that the petitioner's writ petition is allowed and the impugned order dated 25.11.2022 is set aside. The Court found complete agreement with the view taken in *Bharat Mint & Allied Chemicals*. It reasoned that Section 75(4) of the Act mandates an opportunity of hearing when an adverse decision is contemplated, and the assessee is not required to explicitly request for it. The fact that the petitioner may have indicated 'No' for personal hearing in their online reply has no legal consequence. The Court emphasized that in the context of an assessment order creating significant civil liability, affording a minimal opportunity of hearing is mandatory as per the principles of natural justice. Such an opportunity must be granted in real terms to ensure that the authority can pass an appropriate and reasoned order. The matter is remitted to the Assistant Commissioner, State Tax, Aligarh, to issue a fresh notice to the petitioner within two weeks. The petitioner undertook to appear on the next date fixed for expeditious conclusion of proceedings.
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 indication of 'No' for personal hearing in their online reply, as per Section 75(4) of the U.P. GST Act, 2017? Petitioner's Arguments: The petitioner argued that Section 75(4) of the Act mandates an opportunity of hearing when an adverse decision is contemplated, irrespective of whether a formal request for personal hearing is made. They relied on the interpretation of Section 75(4) by a coordinate bench of this 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 adverse assessment order creating a demand of approximately Rs. 3 crores was contrary to law due to the denial of hearing. Revenue's Arguments: 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, the petitioner could not subsequently claim an error in the order passed based on this declination.
Sections Cited
Section 75(4)
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Chief Justice's Court Case :- WRIT TAX No. - 550 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 25.11.2022 passed by the Assistant Commissioner, State Tax, Sector-6, Aligarh for the tax period April 2018, whereby demand in excess to Rs. 3 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 21.10.2022 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. 3 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 because 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.