Non Consideration Of Reply Filed By Assessee Amounts To Violation Of Natural Justice Principles: Kerala High Court

A Division Bench of the Kerala High Court while allowing an appeal on Thursday observed that non consideration of a reply filed by the assessee amounts to violation of the principles of natural justice, when the existence of such reply is within the knowledge of the assessing officer.

The appellant M/S. Euro Business System had approached this Court challenging the order of assessment issued by the State Tax Officer and the order of this Court rejecting the rectification application.

When the writ petition was initially filed before this court, a Single Judge had dismissed it holding that the question whether the assessing officer should consider the reply submitted subsequently should be considered by the statutory appellate authority, and the appellant has remedy of approaching the appellate authority in this regard. It was also held that the error pointed out by the appellant is not self evident or manifest and refused to interfere with the order.

Representing the appellant, Adv. Kurian Thomas argued that the order of assessment was impugned since it was passed without considering the reply filed by the appellant. The order of the Single Judge rejecting the rectification application was challenged on the ground that it failed to address the apparent error on the face of record pointed out by the appellant.

Background of the Case:

When a pre-assessment notice dated 10.08.2020 was issued under Kerala Value Added Tax Act for FY 2016-17, the appellant appeared before the State Tax Officer on 29.09.2020 and sought time for filing a reply, which was agreed upon to be filed on or before 25.10.2020. Accordingly, the appellant filed reply on 22.10.2020 objecting to the proposals in notice.

On 10.12.2020, the appellant received an ex-parte order dated 30.09.2020, where the State Tax Officer had completed the best judgment assessment for FY 2016-17, holding that there was no response to the notice issued to the appellant.

The appellant alleged that the order was despatched from the State Tax Officer's office 64 days after the date of order, and that the order is predated to show on record that the order of assessment was issued much before filing of reply. It was contended that assessment is not complete until the assessment order is served on the assessee, and that the reply filed by the assessee on should have been considered by the assessing authority

Observations of the Court

Upon perusal of both typed and manuscript copies of the assessment order, Justice S.V. Bhatti and Justice Murali Purushothaman observed that the assessment order was despatched from the State Tax Officer 64 days after date of order after receipt of the reply filed by the assessee.

Accordingly, it was held thus:

"We find that the reply filed by the assessee was well within the knowledge of the second respondent before the order was issued for communication to the assessee. Non consideration of the reply filed by the assessee therefore amounts to violation of the principles of natural justice. Accordingly, the order is set aside."

The Court also directed the State Tax Officer to pass a fresh order after considering the reply given by the assessee on 22.10.2020 within eight weeks from the date of receipt of the judgment.

M/S. Euro Business System v. State of Kerala

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