Facts of the Case

The petitioner, Y.K. Devanatha, challenged an ex-parte re-assessment order bearing No. ACCT.(LGSTO)-60/CR/2023-24 issued under Section 38(7) read with Sections 36(2), 40(2) and 72(5) of the Karnataka Value Added Tax Act, 2003, read with Section 174 of the Karnataka Goods and Services Tax Act, and the consequent demand notices dated 27.03.2024, confirming a total demand of Rs.51,81,474 including tax, interest and penalty for the tax period 2017-18.

Issues Involved

  1. Whether the ex-parte re-assessment order ought to be set aside on account of the petitioner's bona fide inability to submit a reply or contest the proceedings.

Petitioner's Arguments

  • Though an opportunity of personal hearing was afforded on 23.02.2024 and extended to 15.03.2024, and the petitioner appeared along with his auditor, no reply could be furnished due to bona fide reasons, unavoidable circumstances and sufficient cause; one further opportunity was sought.

Respondent's Arguments

  • The learned HCGP submitted that there was no merit in the petition and that it was liable to be dismissed.

Court Order / Findings

  • Justice S.R. Krishna Kumar, having regard to the petitioner's specific assertion of bona fide reasons and unavoidable circumstances, adopted a justice-oriented approach and provided one more opportunity, but conditioned it on payment of costs.
  • The petition was allowed subject to payment of Rs.10,000 as costs to the High Court Legal Services Authority, Bengaluru, with the impugned order dated 27.03.2024 set aside and the matter remitted for reconsideration from the stage of the petitioner submitting its reply to the show cause notice.
  • The petitioner was directed to appear on a fixed date without awaiting further notice, failing which the order would stand automatically recalled.

Important Clarification

  • Even where a taxpayer had earlier appeared at a personal hearing (along with an auditor) but still failed to file a reply, courts may grant one further, cost-conditioned opportunity to contest an ex-parte re-assessment, balancing the taxpayer's bona fide explanation against the need to deter repeated non-compliance.

Sections Involved

  • Section 38(7), 36(2), 40(2) and 72(5), Karnataka Value Added Tax Act, 2003 — reassessment and related procedural provisions.
  • Section 174, Karnataka Goods and Services Tax Act, 2017 — repeal and saving provision continuing VAT-era proceedings under GST transitional framework.

Decision – In Favour of

In favour of the Assessee, subject to costs — the ex-parte order was set aside and the matter remitted to the reply stage.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: WP No. 31346 of 2025
Neutral Citation: 2025:KHC:41781
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 16.10.2025

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