The High Court agreed with the contentions of the appellant, observing that the negative reports received by the department were not shared with the appellant, resulting in the violation of natural justice.
Nidhi | Feb 7, 2026 |
Form-C Benefit Rejection Without Sharing Negative Report to Appellant Violates Natural Justice: Gujarat HC
The Gujarat High Court quashed the order passed by the Income Tax Appellate Tribunal (ITAT) and the First Appellate Authority for violating the principles of natural justice.
The appellant company, Shreeji Vitrified Pvt. Ltd., had claimed benefits of a concessional rate of tax on interstate sales through Form C. The appellant submitted several documents, such as Form-402, copies of transport receipts, and copies of tax invoices, to prove the genuineness of the interstate sales transactions. However, the first appellate authority rejected the claim of Form C to the tune of Rs 92,30,891, relying on the negative report shared by the corresponding states and also on the ground that Form C was not reconciled on the TINXSYS website.
The appellant approached the Tribunal, which rejected the appeal filed by the assessee. Therefore, the assessee filed an appeal before the Gujarat High Court, arguing that the tribunal did not apply its mind and ignored the assessee’s contentions that the negative report, based on which the claim was rejected, was never shared with the appellant.
The High Court agreed with the contentions of the appellant, observing that the negative reports received by the department were not shared with the appellant, resulting in the violation of natural justice. The Court also noted that the tribunal had rejected the appeal without considering the assessee’s submission and without recording any reasons.
The Court ruled that the authority must always submit copies of the negative reply to the appellant before passing the order. Since the first appellate authority had failed to submit a copy of such a report and the ITAT also failed to consider the assessee’s contentions, the court set aside both orders and remanded the matter to the first appellate authority.
The First Appellate Authority was directed to pass a new order after hearing the appellant’s contentions and sharing a copy of the negative report.
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