M/S.Sparrow Reality vs. The State Tax Officer

Facts

The petitioner, M/s. Sparrow Reality, filed two writ petitions challenging assessment orders dated September 30, 2020, passed by the State Tax Officer, Trichy. These orders pertained to the tax periods 2018-19 and 2019-20. The petitioner is a firm registered under GST and provides agency services. Following an inspection authorized on January 20, 2020, and a sworn statement recorded on January 27, 2020, the respondent issued show-cause notices on June 1, 2020. The petitioner sought an adjournment due to the COVID-19 lockdown and later filed a detailed reply on July 24, 2020. However, the petitioner contends that the respondent passed the impugned orders without considering their reply. The petitioner sought to quash these orders and requested a fresh assessment with an opportunity for cross-examination and personal hearing.

Held

The Court held that the impugned assessment orders were liable to be set aside. While acknowledging that a personal hearing was initially given, the Court noted that the petitioner was unable to appear during the peak period of the COVID-19 pandemic. Therefore, the Court found it necessary to grant the petitioner a further opportunity for a personal hearing to explain their case. The reasoning was rooted in the principles of natural justice, emphasizing the need for a fair hearing. The Court's decision was that the assessment orders were passed without fully adhering to these principles, particularly given the extraordinary circumstances of the pandemic. The ratio decidendi is that in situations where a party's ability to participate in proceedings is hindered by unforeseen circumstances like a pandemic, principles of natural justice necessitate providing a fresh opportunity for hearing and cross-examination. Consequently, the Court set aside the impugned orders and remanded the matter back to the respondent for fresh consideration, directing that the petitioner be given an opportunity for cross-examination and a personal hearing. The respondent was instructed to complete this exercise within eight weeks.

Key Issues

1. Whether the impugned assessment orders are liable to be quashed on the grounds of illegality and violation of principles of natural justice, specifically concerning the denial of an opportunity for cross-examination and personal hearing to the petitioner? (Question of law and mixed fact and law) Petitioner's Contention: The petitioner argued that before passing any assessment orders, the respondent was obligated to provide an adequate opportunity for the petitioner to explain their case, including the right to cross-examine any evidence or individuals relied upon by the respondent. They asserted that the impugned orders were passed without affording these essential procedural safeguards, thus violating principles of natural justice. Respondent's Contention: The respondent contended that opportunities were indeed provided to the petitioner to produce their accounts for verification. They argued that the petitioner failed to avail these opportunities, and consequently, the respondent proceeded to pass the impugned orders. The respondent maintained that there was no illegality or infirmity in their actions.