Order date – 12 April 2023

Parties – M/S Lari Almira House Vs State Of U.P. And 3 Others

Facts –

• The petitioner, M/S LARI ALMIRA HOUSE, had claimed input tax credit for the financial year 2017-18 in accordance with the law.
• An inspection was carried out by the Deputy Commissioner (SIB), Commercial Tax, Gorakhpur on 20.04.2018, and a Panchanama was prepared in pursuance of the inspection.
• Subsequently, summons were issued to the petitioner under Section 70 of the Act and the petitioner appeared and filed a reply.
• After about three years on 02.09.2021, the petitioner was served with a show cause notice under section 74 of the U.P.G.S.T. Act based on the SIB survey report.
• The petitioner was not supplied with a copy of the SIB report.
• An ex-parte order came to be passed on 24.01.2022 solely based upon the SIB report.

Issue –

• Whether the impugned order passed by the adjudicating authority is in accordance with the law?

Order –

• The Court observed that an ex-parte order was passed against the petitioner on 24.01.2022 solely based on the SIB report, without granting the petitioner any opportunity of hearing.
• The power of search and seizure is conferred by Section 67 of the Act, while the power of scrutiny of returns filed is conferred upon the proper officer under Section 61 of the Act. These sections are steps towards initiating proceedings under Section 73 or Section 74 of the Act, which require establishing evasion of tax through prescribed procedures.
• Mere discrepancies found during scrutiny of returns or inspection are not enough to assess and levy tax; they must be corroborated with materials such as evidence.
• The department must provide an opportunity of hearing to the assessee under Section 75(4) of the Act, and any document proposed to be relied upon must be provided to the assessee prior to conclusion of proceedings.
• The order is quashed, and the matter is remanded to the adjudicating authority to pass a fresh order after supplying the copy of the SIB report, giving an opportunity of hearing to the petitioner, and an opportunity of filing a reply.
• Both writ petitions stand allowed in terms of the said order.

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