Top Stories Personal Hearing mandatory if Rectification Application decision affects filer Adversely: Madras HC [Read Order] The principles of natural justice, embedded in the third proviso to Section 161, require that an assessee be granted a hearing if the decision on rectification adversely impacts them, regardless of whether the rectification application is initiated by the assessee or the authority By Navasree A.M – On December 1, 2024 2:53 pm – 2 mins read

Recently, the Madurai bench of Madras High Court clarified that the 3rd Proviso of the Section 161 of Goods and Services Tax ( GST ) Act mandates personal hearing if the decision on rectification application filed by the assessee affects him adversely. Justice K. Kumaresh Babu stated that “The principles of natural justice had been inbuilt by way of the 3rd Proviso to Section 161. If pursuant to a Rectification Application, if a rectification is made and if it adversely affects the assesse, Proviso 3 contemplates an opportunity of hearing to be given.” The case arose when the petitioner challenged the rejection of their rectification application by the Assessing Officer. Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

The petitioner contended that the rectification application, filed within the prescribed time limit, was rejected without assigning reasons or granting an opportunity for a hearing. It was argued that the impugned order lacked reasoning regarding why the original assessment order did not suffer from any apparent error. The petitioner sought the setting aside of the rejection order and a fresh decision after a personal hearing. On the other hand, the Additional Government Pleader argued that the rectification application could be rejected without mentioning any reasons if the Assessing Officer found no apparent error. The department counsel further submitted that the proviso to Section 161, mandating a hearing, applies only when the Assessing Officer initiates rectification suo motu and the rectification adversely affects the assessee. Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here The court reviewed the submissions and the materials on record. It was observed that the rejection order lacked clarity and reasoning.

The bench observed that the principles of natural justice, embedded in the third proviso to Section 161, require that an assessee be granted a hearing if the decision on rectification adversely impacts them, regardless of whether the rectification application is initiated by the assessee or the authority. Thus,the impugned rectification order was set aside, for failing to follow the procedures mentioned under the GST Act. It directed the Assessing Officer to reconsider the rectification application and pass a fresh order after affording the petitioner an opportunity to present their case.