Filing of Irrelevant Reply by Consultant Cannot Preclude Assessee from Fair Hearing; Order Quashed on Condition: Madras High Court - 2025-10-02

Madras HC Quashes GST Order Citing Consultant's 'Ill-Advised' Reply; Directs Dept to Issue Advisory on Consultants

In a significant order highlighting the perils of flawed professional advice, the Madras High Court has quashed a GST assessment order against a proprietor, attributing the default to an "irrelevant reply" filed by an "unqualified consultant." Justice Krishnan Ramasamy, while granting relief to the petitioner, also directed the GST department to issue a circular advising assessees on the engagement of qualified consultants.

Case Background

The writ petition was filed by Mr. Chandrasekaran, proprietor of Subha Earth Movers, challenging an assessment order dated August 21, 2024, passed by the Assistant Commissioner (ST), Kodumudi Circle. The order resulted in the freezing of the company's bank account with Axis Bank, bringing its business to a "standstill" and leaving half a dozen workers jobless.

The issue stemmed from a show-cause notice issued to the petitioner on May 22, 2024. In response, the petitioner's consultant filed a reply on July 18, 2024, which the court noted was "unrelated to the issue." Consequently, the tax authority passed an adverse order against the petitioner.

Arguments in Court

Petitioner's Stance: The counsel for the petitioner, M/s.R. Ananthi, argued that the irrelevant reply was a direct result of a mistake made by their consultant. Acknowledging the error, the petitioner expressed willingness to pay 25% of the disputed tax amount upfront and requested a fresh opportunity to present their case properly before the tax authority. It was emphasized that the freezing of the bank account had severely crippled the business operations.

Respondent's Stance: The Government Advocate, Ms. P. Selvi, representing the Assistant Commissioner (ST), fairly conceded that the matter could be sent back for fresh consideration, provided the petitioner remitted 25% of the disputed tax amount as a precondition.

Court's Observations on "Unqualified Consultants"

Justice Krishnan Ramasamy took a strong view on the role of consultants, noting a worrying trend of similar cases arising from poor professional advice.

"It is pertinent to mention here that this Court comes across similar instances in several cases, extending ill advice to the clients by the consultants, who are all not qualified persons... Such kind of ill-advice leads to the fact that the clients are not in a position to appear before the Officers concerned with suitable reply supported by documents, which is purely on the negligence on the part of the consultant."

The Court observed that such unqualified consultants, often overburdened with clients, provide flawed advice to retain business, ultimately leading to violations of legal acts and prejudice to the assessee. In a proactive measure, the judge directed the respondent department to address this issue systemically.

"The respondent department is directed to issue note/circular to the assessees to engage consultants and get advice from qualified consultants... the department is directed to come with proper circular to the assessee in respect of engagement of a qualified consultant."

Final Verdict and Directions

Balancing the procedural lapse with the principles of natural justice and the petitioner's hardship, the High Court set aside the impugned order and remanded the matter for fresh consideration. The final decision was subject to the following conditions:

• Conditional Relief: The petitioner must pay 25% of the disputed tax within four weeks for the quashing of the order to take effect.
• De-freezing of Bank Account: The Court ordered the immediate de-freezing of the petitioner's bank account, stating that the attachment cannot survive once the primary order is set aside.
• Opportunity to be Heard: The petitioner was granted three weeks from the date of payment to file a detailed reply with all necessary documents.
• Fresh Adjudication: The tax authority must provide a 14-day notice for a personal hearing and pass a fresh order on merits and in accordance with the law.

This judgment serves as both a relief for assessees prejudiced by poor consultancy and a stern warning about the critical importance of engaging qualified tax professionals.