Rejection of Rectification Application Without Reasons or Hearing Set Aside.

Issue:

Whether an application for rectification of a mistake in an assessment order can be rejected by the tax authority without assigning any reasons for the rejection and without providing an opportunity of personal hearing to the assessee, particularly when the rectification sought could adversely affect the assessee if denied.

Facts:

The petitioner-assessee filed an application for rectification of mistakes against an order of assessment. This rectification application was rejected by the respondent (tax authority). The core grievances of the assessee were that the rejection order did not assign any reasons as to how the original assessment order did not suffer from any apparent error, and crucially, the rejection was made without giving any opportunity of hearing to the assessee.

Decision:

In favor of the assessee: The court found that a perusal of the impugned rejection order revealed no indication of how the assessment order did not suffer from any apparent error, nor was there any reasoning as to why there was no error apparent on the face of the record. The court explicitly rejected the respondent’s strenuous argument that no personal hearing needed to be given when an application was made at the instance of the assessee. The court held that when an order is being made adverse to the assessee (even if it’s a rejection of their own rectification request), they should be given an opportunity of being heard, especially when the rectification, if not allowed, adversely affects them. The court invoked the principles of natural justice, noting they are in-built by way of the Third Proviso to Section 161 (though the user did not provide the full text of Section 161, this suggests a statutory backing for the right to hearing). The court reasoned that while the Third Proviso deals with providing a hearing if a rectification adversely affects a person, it is equally imperative that when an assessee’s rectification application is being rejected without considering the reasons for rectification or giving reasons for rejection, the assessee “should be put on notice.” Therefore, the order of rectification (rejection) passed by the respondent was found to be contrary to the provisions of Section 161 and was set aside.

Key Takeaways:

Reasoned Order for Rectification Rejection: When rejecting a rectification application, the tax authority must pass a speaking order, clearly stating the reasons why the application is being rejected and why the original order does not suffer from any “mistake apparent from the record.” A bald rejection without reasons is unsustainable.
Opportunity of Hearing for Adverse Orders (Even if Initiated by Assessee): Even if an application for rectification is filed by the assessee themselves, if the outcome of the authority’s decision (i.e., rejection of the rectification) is adverse to the assessee, the principles of natural justice mandate that an opportunity of personal hearing be provided. This is to ensure that the assessee can explain their contentions and address any counter-arguments from the department.
Section 161 and Natural Justice: The judgment refers to the Third Proviso to Section 161 (likely the GST Act provision for rectification of mistakes), which emphasizes the importance of providing a hearing when a rectification adversely affects a person. The court extends this principle to the rejection of rectification applications, especially when it leads to an adverse outcome for the assessee.
“Put on Notice”: This phrase implies that the assessee must be properly informed of the reasons for potential rejection and given a chance to make submissions before a final adverse decision is taken on their rectification request.
Consequence of Procedural Violation: Orders passed without fulfilling the requirement of a reasoned decision and an opportunity of hearing, particularly when mandated by principles of natural justice or statutory provisions, are liable to be set aside by courts.

HIGH COURT OF MADRAS

Tvl.Kajah Enterprises (P.) Ltd.

Assistant Commissioner (Inspection) (ST-IU)

M. Dhandapani, J.

W.P.(MD). No. 11831 of 2025
W.M.P.(MD). Nos. 8730 and 8733 of 2025

MAY 8, 2025

Ms. A. Lakshmi for the Petitioner. M. Lingadurai, Special Government Pleader for the Respondent.

ORDER

1. The challenge in the Writ Petition is to the order passed in the Rectification Application.

2. Heard M/s.A.Lakshmi, learned counsel for the petitioner and Mr.M.Lingadurai, learned Special Government Pleader appearing for the respondent.

3. The learned counsel for the petitioner would contend that the petitioner had filed a Rectification Application of the Order of Assessment dated 06.01.2025 for the assessment year 2017-18, within the given time. However, the respondent, without assigning any reasons as to how the order of assessment does not suffer from any apparent error and that too without giving any opportunity of hearing, has rejected the application of rectification. Therefore, he would submit that the order impugned herein would have to be set aside with a direction to the respondent.

4. On the contrary, the learned Special Government Pleader would vehemently contend that the reasons need not be attributed in rejecting the rectification application. All that is required to be looked at by Authority as to whether based upon the rectification application, there had been an error apparent when the Authority had come to a conclusion and if there is no error apparent, the Authority can reject the Rectification Application without assigning reason. He would further submit that the Proviso appended to Section 161 of CGST Act mandating an opportunity of hearing would only arise, when the Assessing Officer suo motu initiates action for rectification and if such rectification order is detrimental to the interest of the assessee, only then an opportunity of hearing should be granted.

5. In the present case, an application had been made by the petitioner himself and in his application, he had not indicated the error apparent for the Assessing Officer to exercise his powers under Section 161 and therefore, he would submit that no interference is required and prays this Court to dismiss the Writ Petition with liberty to the petitioner to work out his remedy in the manner known to law.

6. I have considered the submissions made by the learned counsels appearing on either side and perused the materials available on record.

7. It is an admitted fact that the petitioner had made a Rectification Application. The order of rectification, which is impugned, would indicate that for the reasons given in the annexure to the said order, the Rectification Application is rejected.

8. A perusal of the order does not also indicate that there had been no error apparent on the record to reject the rectification. There is also no reasonings as to why there is no error apparent on the face of the record. For this reason, the impugned order dated 28.03.2025 is liable to be set aside.

9. Even though, strenuous efforts had been made by the learned Special Government Pleader that no personal hearing need to be given when an application had been made at the instance of the assessee, I am not in agreement with the learned Special Government Pleader. The Proviso indicates that when an order is being made adverse to the assessee, then he should be given an opportunity of being heard when the rectification adversely affects any person. The principles of natural justice had been in-built by way of the 3^rd Proviso to Section 161. If pursuant to a Rectification Application, if a rectification is made and if it adversely affects the assessee, 3^rd Proviso contemplates an opportunity of hearing to be given. However, when a Rectification Application is made at the instance of assessee and the rectification is being sought to be rejected without considering the reasons for rectification or by giving reasons as to why such rectification could not be entertained, it is also imperative that the assessee should be put on notice.

10. For the aforesaid reasons, I am inclined to hold that the order of rectification passed by the respondent dated 28.03.2025 is contrary to the provisions of Section 161 and in that aspect, the same alone is set aside. The Rectification Application filed by the petitioner shall be taken afresh by the respondent and after giving an opportunity to the petitioner, the respondent shall pass appropriate orders in accordance with law. If any such order is made in the Rectification Application, it is for the petitioner to work out his remedy in the manner known to law.

11. With the above observations, this Writ Petition is allowed. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.