Appellate Order Disapproving Adjudication Amount and Method Set Aside for Lack of Reasons: HC

Case Details: Diamond Steel v. State of UP - [2023] 149 taxmann.com 366 (Allahabad)

Judiciary and Counsel Details

• • Pankaj Bhatia, J.
  • Aloke Kumar for the Petitioner.
  • C.S.C. for the Respondent.

Facts of the Case

The petitioner was a partnership concern and search and seizure were carried out by officers of GST special investigation branch (SIB). Thereafter, the department issued notice and passed adjudication order demanding interest and penalty by adopting guidelines issued by Income-tax authorities. The petitioner filed appeal and challenged that the order was passed on basis of findings and report of SIB which was never supplied and method of calculation of demand was incorrect.

The Appellate Authority partly allowed the appeal and held that the manner of assessment done by the adjudicating authority on the basis of the provisions of the Income Tax Act can’t be justified. However, it raised demand of huge amount without disclosing any basis of quantification. The petitioner filed writ petition against both the impugned orders.

High Court Held

The Honorable High Court noted that the Appellate Authority had rejected assessment made based on guidelines issued by Income-tax authorities but quantified tax and penalty without disclosing reasons. Moreover, the contention of department that SIB report was supplied to petitioner during assessment proceedings and petitioner had also submitted reply against said report was not acceptable as impugned orders did not state such report was supplied and reply to same was made.

The Court further noted that the department could issue SCN under section 74 when return furnished contained discrepancies and assessee had failed to take measures to correct such discrepancies. However, the adjudication order quantifying demand amount on basis of guidelines issued by Income-tax authorities and appellate order quantifying demand amount without providing reasons though disapproving quantification method adopted by Adjudicating Authority were not in accordance with section 74. Therefore, the Court held that the impugned orders were liable to be set aside.