Ex-parte assessment order passed in violation of the principles of natural justice entails civil consequences

Last updated: 30 January 2023

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Quick Summary

The Patna High Court has quashed an ex-parte assessment order that rejected an assessee's Input Tax Credit claim and imposed a significant tax liability. The court found that the order was passed in violation of the principles of natural justice, as the assessee was not given a proper opportunity to be heard or present their case. This decision highlights the importance of fair hearings, especially when civil consequences are involved.

Court :
Patna High Court

Brief :
The Hon'ble Patna High Court in M/s Balram Singh v. Union of India & Ors. [Civil Writ Jurisdiction Case No. 88 of 2023 dated January 20, 2023] quashed and set aside the ex-parte assessment order passed by the Revenue Department rejecting the Input Tax Credit ("ITC") claim of the assessee and imposing the tax liability of INR 10,06,826/- , on the grounds that it was passed in violation of the principles of natural justice without providing opportunity of hearing or sufficient time to the assessee to represent its case, which entails civil consequences. Held that, opportunity of hearing shall be afforded to the assessee to place on record all essential documents and materials.

Citation :
Civil Writ Jurisdiction Case No. 88 of 2023 dated January 20, 2023

The Hon'ble Patna High Court in M/s Balram Singh v. Union of India & Ors. [Civil Writ Jurisdiction Case No. 88 of 2023 dated January 20, 2023] quashed and set aside the ex-parte assessment order passed by the Revenue Department rejecting the Input Tax Credit ("ITC") claim of the assessee and imposing the tax liability of INR 10,06,826/- , on the grounds that it was passed in violation of the principles of natural justice without providing opportunity of hearing or sufficient time to the assessee to represent its case, which entails civil consequences. Held that, opportunity of hearing shall be afforded to the assessee to place on record all essential documents and materials.

Facts

This petition has been filed by M/s Balram Singh ("the Petitioner") challenging the ex parte summary assessment orders dated February 16, 2020 and February 18, 2020 ("the Impugned Orders") passed by the Revenue Department ("the Respondent") for the period October 2018 to March 2019 wherein, ITC claim of the Petitioner was rejected and tax amounting to INR 10,06,826/- including penalty/interest was imposed without providing any further notice to the Petitioner. Further, the Respondent seized INR 20,00,000/- from the cash credit ledger of the Petitioner by way of recovery against the total liability.

Issue

Whether the Impugned Orders passed by the Respondent are in violation of principles of natural justice?

Held

The Hon'ble Patna High Court in Civil Writ Jurisdiction Case No. 88 of 2023 held as under:

Opined that, the Impugned Order is bad in law on the grounds of violation of principles of natural justice, as no fair opportunity of hearing or sufficient time was not afforded to the Petitioner to represent its case and the Impugned Order being ex parte in nature, does not assign any sufficient reasons by the Respondent for determining the amount due and payable by the Petitioner.
Held that, the ex parte Impugned Order passed in violation of the principles of natural justice, entails civil consequences and opportunity of hearing shall be afforded to the Petitioner to place on record all essential documents and materials.
Set aside the Impugned Orders with a direction to Petitioner to deposit 20% of the amount of the demand raised, before the Respondent within four weeks. Further stated that, if it is ultimately found that the Petitioner's deposit is in excess, the same shall be refunded within two months from the date of passing of the order.
Directed the Respondent,to de-freeze/ de-attach the bank account(s) of the Petitioner, if attached in reference to the proceedings and to decide the case on merits after complying with the principles of natural justice and not to take any coercive steps against the Petitioner during pendency of the case.
Further directed the Petitioner, to fully cooperate in proceedings and not to take unnecessary adjournment.
Further directed the Respondent to decide the case on merits within a period of two months and shall pass a speaking order, assigning reasons, which can be challenged by the Petitioner, if required and desired.

FAQ :

The main issue was whether the ex-parte assessment orders passed by the Revenue Department violated the principles of natural justice by not providing the assessee with a fair opportunity to be heard.

The court quashed the order because it was passed ex parte, meaning without hearing the assessee, thus violating the principles of natural justice. The assessee was not given sufficient time or opportunity to present their case or essential documents.

The ex-parte order rejected the assessee's Input Tax Credit claim, imposed a tax liability of INR 10,06,826/-, and led to the seizure of INR 20,00,000/- from the assessee's cash credit ledger.

The assessee was directed to deposit 20% of the demanded amount with the Revenue Department within four weeks and to fully cooperate in the proceedings without seeking unnecessary adjournments.

The Revenue Department was directed to de-freeze any attached bank accounts, decide the case on its merits after complying with natural justice principles, and pass a speaking order within two months. No coercive steps were to be taken against the assessee during this period.