Aarpee Ashraya vs Assistant Commissioner of Commercial Taxes and Others

S. Abdul Nazeer, J.—The petitioner is a proprietorship concern registered under the Karnataka Tax on Luxuries (Hotels and Lodging Houses) Act, 1979 ("the Act", for short), located at Plot No. 23, Near Jaimunirao Circle, Agrahara Dasarahalli, Magadi Main Road, Bangalore. The first respondent has issued a proposition notice to the petitioner dated August 24, 2009, proposing to determine the tax payable for the period ending March 31, 2008, on the ground that the return submitted by him is incorrect and incomplete. Since the petitioner did not file any objections and participate in the proceedings, he was placed ex parte and an order of assessment was passed as per annexure A1 dated March 30, 2009 determining the taxable turnover at Rs. 50,36,778 and tax payable at Rs. 7,55,578. An order of penalty u/s 7B of the Act was also passed directing the petitioner to pay penalty of Rs. 85,000. This was followed by a demand notice at annexure A dated October 21, 2009 calling upon the petitioner to pay balance of tax in a sum of Rs. 3,43,203 and penalty of Rs. 85,000. Since the petitioner failed to pay the amount in terms of the demand, the first respondent has issued a notice to the fourth respondent u/s 14 of the Act dated May 25, 2010 informing the tax and penalty due by the petitioner for the assessment period from April 1, 2007 to March 31, 2008 and calling upon it to deduct the said amount from the money payable to the petitioner in its account bearing No. 30654476845. The petitioner has called in question the validity of the order of assessment at annexure A1, the demand notice at annexure A and the notice u/s 14 of the Act at annexure D in this writ petition. The learned counsel for the petitioner submits that the proposition notice has not been served on the petitioner by the assessing officer. It is argued that the assessing officer has passed an assessment order on assumptions and presumptions. It is argued that the petitioner has not suppressed any turnover and that the turnover has been correctly declared. It is further argued that the inspection report submitted by the Joint Commissioner of Commercial Taxes (Enforcement), South Zone, Bangalore does not state the true state of affairs. It is argued that the assessing officer has passed the impugned order without service of notice. The alternative remedy available to the petitioner is not efficacious in nature. Therefore, the petitioner has filed the writ petition without availing the alternative remedy.

On the other hand, learned High Court Government Pleader appearing for the Revenue submits that the assessment order impugned in the writ petition is appealable under the Act. The petitioner has to avail of the alternative remedy available to him in law. It is argued that the assessing officer has issued proposition notice, which has been served to the petitioner. It has not chosen to contest the matter. Therefore, the assessing officer had no other option but to place him ex parte and proceed to pass the impugned order and raise the demand. He prays for dismissal of the writ petition.

The learned High Court Government Pleader has produced the assessment records maintained by the first respondent for the assessment period from April 1, 2007 to March 31, 2008. It discloses that the Joint Commissioner of Commercial Taxes (Enforcement), South Zone, Bangalore, has inspected the premises of the petitioner and has sent a report to the first respondent on May 15, 2009. He has asked the first respondent to make use of the information in the report at the time of assessment/reassessment for the relevant period. He has also called upon the respondent to inform him the result of the action taken pursuant to his report. On the basis of the said report sent by the Joint Commissioner of Commercial Taxes (Enforcement), South Zone, Bangalore, the first respondent has sent a proposition notice dated August 24, 2009 to the petitioner. From the records, it is clear that the notice has been issued on one Mr. S. Harish on September 28, 2009. The petitioner was called upon to file his reply within seven days. Since the petitioner did not respond to the said notice, he was placed ex parte and the order of assessment at annexure A1 dated September 30, 2009 was passed. As stated above, since the Joint Commissioner, who is a superior authority in the Department has sent the intelligence report by directing him to make use of the information at the time of assessment/reassessment of the dealer for the relevant period with a further direction to inform him the result of the action taken by the first respondent, the first respondent being the rank of an Assistant Commissioner of Commercial Taxes had no other option but to conclude the assessment immediately. The proposition notice dated August 24, 2009 has been served on one Mr. S. Harish on August 29, 2009. The petitioner is a proprietorship concern. The notice ought to have been served by a registered post or by delivering or tendering it to the person to whom it is addressed or to its agent or affixing a copy thereof at some conspicuous place at the hotel or residence of the proprietor liable to pay tax under the Act as provided under rule 14 of the Karnataka Tax on Luxuries (Hotels and Lodging Houses) Rules, 1979. The records do not disclose as to whether the said S. Harish is an agent of the petitioner. The records disclose that all the other correspondences have been served on S. Nagaraj, the manager of the petitioner, who has acknowledged the receipt of the same by affixing his signature and the seal of the petitioner. In the circumstances, I am of the view that the notice has not been served on the petitioner in accordance with law. It is well established that a person against whom any action is sought to be taken or whose right or interest being affected should be given a reasonable opportunity to defend himself. Service of proposition notice on the dealer in accordance with the Rules is a condition precedent before passing the order of assessment. It appears that on account of the letter of the Joint Commissioner of Commercial Taxes referred to above, the first respondent was in a hurry to conclude the assessment.

The rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. In appropriate cases, in spite of availability of an alternative remedy, the High Court may still exercise its writ jurisdiction, particularly, when the order impugned is opposed to the principles of natural justice. Since the proposition notice has not been served on the petitioner, I have no hesitation to hold that the order of assessment passed by the respondent is opposed to the principles of natural justice. Therefore, I am inclined to entertain this writ petition despite availability of alternative remedy of filing an appeal. In the result, the writ petition succeeds and it is accordingly allowed. The order of assessment at annexure A1 dated September 30, 2009 for the assessment period from April 1, 2007 to March 31, 2008, is hereby quashed. Consequently, the demand notice at annexure A dated October 21, 2009 and the notice at annexure D dated May 25, 2010, issued u/s 14 of the Act are also quashed. The matter is remitted back to the first respondent for fresh disposal in accordance with law. The first respondent shall serve a copy of the proposition notice dated August 24, 2009 on the petitioner in accordance with law within a period of two weeks from the date of receipt of a copy of this order. The petitioner is granted four weeks time from the date of receipt of the copy of the proposition notice to file objections. The first respondent is directed to pass a fresh order of assessment in accordance with law without being influenced by the fact that the report has been sent to him by the Joint Commissioner. All the contentions of the petitioner on the merits are kept open. No costs.