On Tuesday, the Delhi High Court scrutinised the legality of a tax demand issued to a long-standing stock broking entity and examined whether such an order could survive when both the show cause notice and the final demand lacked the most basic rationale.
The case arose from proceedings initiated against a company engaged in stock broking and financial services for nearly three decades. Following an assessment conducted under Section 73 of the Delhi Goods and Services Tax Act, 2017, the Sales Tax Officer raised a demand of Rs. 1,09,404/- for the financial year 2019–20. The controversy stemmed from a show cause notice, which merely recorded that a scrutiny assessment was underway and called upon the assessee to upload documents, without stating the basis of the alleged tax liability. A final order followed, accompanied by Form DRC-07, which cited only one reason, that no reply had been filed by the petitioner.
The Petitioner argued that the notice was wholly vague and did not reveal why proceedings had been initiated. It maintained that it had no meaningful opportunity to respond, as the accountant had failed to bring the notice to the company’s attention. Even otherwise, it submitted, both the show cause notice and the demand were unreasoned and therefore unsustainable.
The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain examined the record and found the grievance well-founded. The Court observed that the foundational document initiating the proceedings did not disclose any grounds and thereby deprived the assessee of an effective opportunity to defend itself. The Bench noted that “It is seen that the SCN actually does not give any reasons…Even the impugned order does not give any reasons.”
In the absence of reasons, the Court held, vitiated both the notice and the consequential demand. The Bench further stated that “neither the SCN nor the impugned demand would sustain. Accordingly, the impugned order is set aside. In response to the SCN, since the reasons are not clear, let the Petitioner appear for a personal hearing before the Delhi GST Department.”
Consequently, the Court set aside the demand and directed that the petitioner be granted a personal hearing before the GST authorities. The Department has been asked to proceed afresh after communicating clear reasons and affording the petitioner an opportunity to respond.
Case Title: M/S RBC Financial Services Pvt. Ltd. Vs. Union Of India And Ors.
Case No: W.P.(C) 17106/2025 & CM APPL. 70370/2025
Coram: Hon’ble Justice Prathiba M. Singh and Hon’ble Justice Shail Jain
Advocate for the Petitioner: Adv. Vineet Bhatia
Advocate for the Respondent: Advs. Vaishali Gupta, Subhi Bharadwaj, Sahaj Garg, Soumyadip Chakraborty
Read Judgment @Latestlaws.com
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