Here's a rundown of a court case where Galaxy Realtors and others took on the Union of India over some tax notice procedures. Let's break it down!
The big question here was whether the government needed to talk to companies before sending them a tax notice. According to a guideline from 2017, if the tax demand is over 50 lakhs, they should. But the government didn't do this, and Galaxy Realtors wasn't happy about it.
Section 73 of the Finance Act, 1994, doesn’t mention needing a pre-consultation. But a guideline from the Central Board of Excise and Customs said it’s a must for big demands. The court had to decide if this guideline was something the government had to follow.
"Pre-show cause notice consultation... is mandatory and shall be done by the Show Cause Notice issuing authority."
Other courts, like in Delhi and Gujarat, had already said this pre-consultation was necessary. They canceled notices that didn’t follow this rule. The government, however, argued that these decisions shouldn't be followed because they were challenging them in the Supreme Court.
The Bombay High Court agreed with Galaxy Realtors. They canceled the notices because the government skipped the pre-consultation step. They said these guidelines are binding on the government, and skipping them isn't acceptable.
The court gave the government a chance to fix things. They have to start the pre-consultation process within four weeks and then decide if they want to issue new notices. The time limit for taking action was paused during this whole legal back-and-forth.
"The impugned show cause notices are hereby quashed and set aside."
The court decided that the government must follow its own guidelines about talking to companies before sending big tax notices. They canceled the notices that didn't follow this rule and gave the government a chance to start over with the correct process.
