Best-judgment assessment stands deemed withdrawn automatically once a non-filer subsequently furnishes valid tax returns.
Issue
Whether a best-judgment assessment order and its consequential recovery proceedings can legally survive after a non-filer subsequently files the outstanding returns with applicable tax, interest, and late fees under Section 62(2) of the CGST/APGST Act.
Facts
-
The Assessment: The petitioner-assessee was assessed under a best-judgment assessment via an order dated July 20, 2024, accompanied by a demand summary in FORM GST DRC-07 for the tax period of May 2024 due to a failure to file regular returns.
-
Delayed Filing: The petitioner subsequently filed the outstanding returns for the said period on December 2, 2024, along with the full payment of due tax, interest, and late fees.
-
Coercive Recovery: Prior to the filing of these returns, the tax authorities had already initiated coercive recovery measures and issued garnishee attachments based on the original best-judgment demand.
-
Writ Petition Filed: The assessee approached the High Court seeking a stay on the recovery actions, invoking the statutory protection of Section 62(2) which mandates the “deemed withdrawal” of best-judgment assessments upon late filing.
-
Department’s Admission: The respondents confirmed to the Court that the returns were successfully furnished on December 2, 2024, and explicitly stated that no outstanding tax dues remained on record for that period.
Decision
-
Deemed Withdrawal Enforced: The High Court ruled in favor of the assessee, holding that by virtue of the legal fiction created under Section 62(2), the original best-judgment assessment order and the DRC-07 summary stood automatically withdrawn the moment the returns were furnished.
-
Extinguishment of Demands: The Court declared that since the underlying tax demand was legally extinguished by operation of law, the tax department possessed no authority to pursue recovery.
-
Garnishee Orders Quashed: Consequently, the Court set aside and cancelled all consequential garnishee bank attachments initiated by the respondents.
Key Takeaways
-
Automatic Statutory Relief: Section 62(2) operates as an absolute deeming fiction. Once a non-filer complies by filing the pending returns and clearing the interest and late fees, the best-judgment assessment order dissolves automatically without requiring a formal cancellation order from the tax officer.
-
Immediate Cessation of Recovery: Tax authorities cannot continue or initiate bank attachments or garnishee actions once the delayed returns are validated on the portal. The survival of recovery proceedings is strictly contingent upon an active, non-extinguished demand.
-
Time-Bound Protection: While this statutory mechanism completely wipes away the best-judgment order, taxpayers must ensure they file the missing returns within the specific statutory window prescribed under Section 62 to successfully trigger the automatic withdrawal.