In a recent decision by the Bombay High Court, the court addressed whether a pre-consultation notice is necessary before sending a formal notice for tax demands over 50 lakhs. Judges M.S. Sonak and Advait M. Sethna delivered the decision, emphasizing the importance of discussing with taxpayers before taking formal action in tax matters.
The case involved several requests from companies challenging the tax department's formal notices. The companies argued that these notices were sent without the required pre-consultation process, as stated in the guidelines from the Central Board of Excise and Customs (CBEC).
"Sending pre-consultation notices... is required and must be done by the authorities issuing the formal notices."
The court confirmed that the CBEC guidelines are mandatory for the tax department. These guidelines clearly state that for demands over 50 lakhs, a pre-consultation notice is necessary. The court referred to previous cases that supported this view, reinforcing the requirement of these notices.
The pre-consultation process is meant to help businesses and encourage them to follow tax rules willingly. It's a way to solve issues without going through long legal battles. The court pointed out that this process is important for making business operations easier and reducing unnecessary legal cases.
Since the formal notices in these cases were sent without the required pre-consultation, the court canceled them. However, it allowed the tax department to start over, this time following the correct process.
The tax department has been given a deadline to send new pre-consultation notices and complete the process. This ensures that the companies involved have a fair chance to discuss and solve the tax demands before any further action is taken.
"The pre-consultation process cannot be ignored as a mere formality... it encourages resolving disputes in a different way."
This decision highlights the importance of following the correct steps in tax matters. It reminds the tax authorities about the need to stick to established guidelines, ensuring fairness and openness in tax proceedings.
This case shows how important pre-consultation notices are in large tax demands, promoting a more cooperative and less confrontational approach to following tax rules.
