I-T Assessee Must Respond to Summons: SC

New Delhi: The Supreme Court has held that an assessee must comply with a summons and furnish a response to a show cause notice when issued by either the Central or State tax authority.

Under the Income-Tax Act of 1961, an "assessee" refers to any individual or entity legally liable for tax payments or other financial obligations specified under tax law.

Laying down guidelines to prevent duplication of adjudication by Central and State GST authorities, a bench of Justices J. B. Pardiwala and R. Mahadevan observed that the mere issuance of a summons does not mean proceedings have been initiated.

The apex court stated: “Where a summons or a show cause notice is issued by either the Central or the State tax authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response. Where an assessee becomes aware that the matter being inquired into or investigated is already the subject of an inquiry or investigation by another authority, the assessee shall forthwith inform, in writing, the authority that has initiated the subsequent inquiry or investigation.”

The court further directed that respective tax authorities must communicate with each other to verify the assessee’s claim once such intimation is received.

The bench added: “This course of action would obviate needless duplication of proceedings and ensure optimal utilisation of the Department’s time, effort, and resources. If the claim of the taxable person regarding overlap of inquiries is found untenable, and the investigations of the two authorities pertain to different subject matters, an intimation to this effect, with reasons and specification of the distinct subject matters, shall be immediately conveyed in writing to the taxable person.”

The court clarified that tax authorities are well within their rights to conduct inquiries or investigations until it is established that both are examining the identical liability.

It ruled that any show cause notice issued in respect of a liability already covered by an existing notice shall be quashed.

The court further directed that if both Central and State authorities find they are examining the same matter, they must decide among themselves which authority will continue the inquiry. The other authority shall then forward all relevant material and information to the designated authority for logical conclusion of the case.

The verdict, delivered on August 14, came in response to a plea by Armour Security, a public limited company providing security services and registered with the Delhi GST authorities, which was involved in a dispute concerning tax demands and investigations.