M/S. Hotel Sun World vs. The State Tax Officer

Held

The Court held that while the petitioner appeared to be evading tax, as evidenced by the lack of proper returns for the bar operations, the impugned assessment orders were indeed passed without furnishing the materials upon which the demand was confirmed. Consequently, the Court decided to partly come to the petitioner's rescue by setting aside the impugned orders and remitting the case back to the first respondent for fresh consideration. This decision was made conditional upon the petitioner depositing Rs. 30,00,000/- to the credit of the department within 30 days. The Court reasoned that in the absence of proper records, the first respondent would be entitled to confirm the demand using the best judgment method. The impugned orders were to be treated as addendums to the show cause notices. The first respondent was directed to furnish the relied-upon documents within 30 days, and the petitioner was to file a reply within 60 days thereafter. Fresh orders were to be passed within six months, with an opportunity for the petitioner to be heard. The petitioner was also directed to cooperate with the first respondent.

Facts

The petitioner, M/s. Hotel Sun World, operating a hotel and bar, challenged assessment orders issued by the State Tax Officer for the assessment years 2017-18 to 2022-23. The petitioner contended that during an inspection from December 8-10, 2022, show cause notices and personal hearing notices were issued. The petitioner requested documents, specifically a report from the Manager, TASMAC, regarding liquor purchases, which was allegedly not provided before the impugned orders were passed on May 3, 2024. The petitioner also stated that Rs. 2,62,284 was collected during the inspection. The petitioner argued that the orders violated principles of natural justice due to non-furnishing of relied-upon documents. The revenue contended that the petitioner did not cooperate during the inspection and subsequent hearings, leading to the orders being passed based on available information.

Key Issues

1. Whether the impugned assessment orders passed by the first respondent are liable to be quashed for violating the principles of natural justice by not furnishing the relied-upon documents to the petitioner? (Question of law) Petitioner's arguments: The petitioner argued that the assessment orders were passed in violation of natural justice principles because the first respondent failed to provide crucial documents, specifically the report from the Manager, TASMAC, regarding liquor purchases, despite repeated requests. The petitioner asserted that without these documents, they could not effectively respond to the show cause notices and personal hearing notices. The petitioner also highlighted the collection of Rs. 2,62,284 during the inspection as an additional ground for interference. Revenue's arguments: The learned Government Advocate for the first respondent contended that the petitioner did not cooperate with the inspection team and subsequently failed to cooperate with the department during the personal hearing notices. Therefore, the impugned orders were passed confirming the demand based on the information available, as the petitioner was evading tax and not filing proper returns for the bar operations.