Assessment Order issued without taking into consideration reply filed by the Assessee is not valid

The Delhi High Court has ruled that an assessment order is invalid if the tax authority fails to consider the taxpayer's reply. In a case involving Emco Cables Pvt. Ltd., the court found that the Proper Officer must review the submitted explanation on its merits. If further details are needed, the authority should request them, rather than simply deeming the reply unsatisfactory without proper examination. Consequently, the original order was set aside and sent back for reconsideration.

The Hon'ble Delhi High Court in the case of Emco Cables Pvt. Ltd. v. Union of India [W.P. 1622 of 2024 dated February 27, 2024] disposed of the writ petition, thereby holding that, the reply filed by the Assessee should be taken into consideration at the time of passing the Assessment Order and in case where proper reply/explanation has not been filed and when further details are required, the Revenue Department is obliged to seek the relevant documents/details. 

Facts

The Revenue Department ("the Respondent") issued the Show Cause Notice dated September 24, 2023 ("the SCN"), against Emco Cables Pvt. Ltd. ("the Petitioner") wherein it was alleged that the Petitioner has under-declared output tax, claimed excess Input Tax Credit ("ITC") and claimed ITC from cancelled dealers and non-taxpayers for which detailed reply was filed by the Petitioner. However, the Respondent vide order dated December 29, 2023 ("the Impugned Order") recorded that, the reply filed by the Petitioner is not satisfactory and directed that DRC-07 should be issued in the present case. 

Aggrieved by the Impugned order, the Petitioner filed a writ petition contending that the Petitioner has filed a detailed reply.  

Issue

Whether the Assessment Order issued without taking into consideration the reply filed by the Assessee is valid?

Held

The Hon'ble Delhi High Court in the case of W.P. 1622 of 2024 held as under:

• Noted that, the Proper Officer was required to consider the reply on merits and thereafter form an opinion on whether the reply filed by the Petitioner was sufficient or not. 
• Further Noted that, even if the Proper Officer was of the view that the reply filed by the Petitioner is incomplete and further details were required, the said details could have been sought from the Petitioner. However, as per the records no such opportunity was granted to the Petitioner. 
• Opined that, the Proper Officer merely held that, no proper reply/explanation was received which ex-facie shows that, the Proper Officer of the Respondent has not perused the reply submitted by the Petitioner.
• Held that, the Impugned Order is set aside and the matter is remitted back to the Proper Officer for re-adjudication.