2025 Supreme(Online)(Bom) 203097

HIGH COURT OF BOMBAY
Bharati Dangre, Ashish S. Chavan, JJ
Milroc Good Earth Developers – Appellant
Versus
Union of India – Respondent
WRIT PETITION NO.2203 OF 2025 | WRIT PETITION NO.2312 OF 2025

Tax authorities cannot issue consolidated or composite show cause notices covering multiple financial years, as the statutory scheme requires tax assessment to be conducted per tax period, respecting individual limitation periods and allowing distinct defenses for each financial year.

Headnote:(A) Taxation Laws - Central Goods and Services Tax Act, 2017 - Sections 2(11), 2(97), 2(106), 39, 73, 74, 74A - Assessment of tax - Composite show cause notice - Legality - The statutory scheme of taxation envisages assessment for each 'tax period' corresponding to returns filed, which are linked to specific independent financial years - Each financial year constitutes a distinct unit of assessment with separate periods of limitation - Clubbing or bunching of multiple financial years into a single show cause notice frustrates the limitation scheme and prevents the assessee from providing year-specific rebuttals - Such consolidated notices, covering different assessment periods, constitute jurisdictional overreach and are impermissible under the statutory framework. (Paras 7, 17, 18, 19, 21)

(B) Writ Jurisdiction - Maintainability - Preliminary objection regarding premature challenge to show cause notice - Where the issue raised pertains to the fundamental jurisdiction of the authority to issue a consolidated notice, the court is not constrained to relegate the petitioner to the alternative remedy of responding to the notice before the department. (Para 10)

Facts of the case:
The petitioners challenged the validity of show cause notices issued by taxation authorities, which consolidated demands for tax, interest, and penalties across multiple financial years into singular documents. Petitioners argued that the statutory scheme requires returns to be filed for specific tax periods and that consolidated assessment unfairly curtailed their ability to defend year-specific liability and bypassed specific limitation periods. The revenue contended that the challenge was premature and that consolidated notices were permissible under the statutory scheme for tax enforcement.

Findings of Court:
The court held that the legislative intent behind the tax regime is to treat each financial year as an independent unit for the purpose of assessment and limitation. Issuing a composite notice for multiple financial years denies the assessee the right to formulate distinct defences for each period and disrupts the statutory timelines for recovery. Consequently, the act of clubbing such periods in a single show cause notice is found to be without jurisdiction.

Issues: The main issues were whether tax authorities possess the jurisdiction to issue a consolidated show cause notice for multiple financial years and whether such a practice violates the statutory limitation and assessment framework.

Ratio Decidendi: The determination of tax liability is inherently tied to the 'tax period' prescribed by the statute, necessitating annual assessments. Since the limitation periods for recovery are linked to the filing of annual returns for each financial year, the consolidation of multiple years into one notice creates a procedural illegality that impairs the taxpayer's rights and offends the spirit of the legislation.

Result: Petitions allowed; impugned consolidated show cause notices are quashed and set aside.