Invalidity of Composite Assessment Orders Spanning Multiple Financial Years
Facts
-
The Scope: The Petitioner, a registered company, was served with a single, composite assessment order covering a period from November 2020 to October 2023.
-
The Overlap: This period spanned across multiple tax periods and more than one financial year.
-
The Challenge: The Petitioner approached the Court specifically challenging the procedural illegality of issuing a composite assessment rather than year-wise adjudications.
-
The Conflict: The core dispute centered on whether the Revenue has the authority to combine multiple assessment years into a single Show Cause Notice (SCN) and a subsequent single order under Section 73.
Decision
-
Final Verdict: In favour of the Assessee (Matter Remanded).
-
Ratio Decidendi:
-
Periodicity of Assessment: Relying on Division Bench precedents, the Court held that a single SCN or composite assessment order cannot be issued for more than one tax period before the due date for the annual return, or for more than one financial year after the due date.
-
Statutory Infraction: Since the impugned order clubbed multiple periods across different financial years into one adjudication, it was deemed contrary to the settled legal view on tax periodicity.
-
Outcome: The Court set aside the composite assessment order and quashed all coercive recovery measures. The Department was granted liberty to initiate fresh, separate proceedings for each assessment year. To protect the Revenue’s interest, the time spent in this litigation was directed to be excluded for limitation purposes.
-
Key Takeaways
-
Year-Wise Adjudication is Mandatory: For Section 73 (non-fraud) cases, the Revenue must treat each financial year as a separate unit for adjudication. A composite notice covering 3–4 years is procedurally flawed and jurisdictionally vulnerable.
-
Defense Against Bulk Notices: If a client receives a “bulk SCN” covering multiple financial years, this ruling provides a strong ground to challenge the very maintainability of the notice via a Writ Petition.
-
Limitation Scrutiny: Because each year has a different limitation period for issuing an SCN and passing an order (linked to the annual return due date), clubbing years often leads to “time-barred” periods being smuggled into “live” periods. Separate orders ensure the limitation for each year is strictly calculated.
-
Strategy for Pending Cases: In cases where a composite order has already been passed, taxpayers should not only argue on merits but also raise this procedural illegality to have the order set aside, potentially buying more time as the Department must start the process fresh.