M/s Wonder Enterprises v. State of U.P. & Anr.

What happened

A section 74 notice was issued on 17 June 2021. Wonder Enterprises replied twice in July 2021, but the adjudicating officer’s order dated 30 January 2025 did not consider either reply. Recognising that omission, the officer passed another order on 5 February 2025 under the rectification power. Instead of recalling the first order and arranging a hearing, the officer considered the replies ex parte and maintained a reduced demand.

Questions before the court

• Whether an officer can cure complete non-consideration of replies by issuing a second adverse ex parte order under section 161.

What each side argued

The taxpayer challenged the method of correction. The State said the later order was not prejudicial because it reduced part of the original demand. The existence of the replies, their omission from the first order and the absence of a fresh hearing were undisputed.

Why the court ruled this way

The court accepted that rectification and procedural recall were available; the problem was their use. The omission struck at the opportunity to be heard. Under the distinction explained in Grindlays Bank, curing such a procedural defect does not authorise a fresh merits decision behind the party’s back. Reducing an arithmetical demand may sometimes be non-prejudicial, but maintaining a disputed liability after previously ignoring the defence is different. The officer needed to recall and hear the taxpayer before making the fresh determination.

Controlling point

Where an adjudication ignored replies altogether, procedural correction requires a fresh hearing before a new adverse merits order; a reduced demand does not by itself cure the denial of hearing.

Order and next steps

The order dated 5 February 2025 was set aside. The matter was remitted for a fresh order after an opportunity of hearing. The writ was allowed without costs.

Practical implications

Keep portal acknowledgments and copies of every reply. If a rectification order newly evaluates a previously ignored defence, examine whether notice and hearing preceded it. The appropriate relief may be fresh adjudication rather than permanent cancellation of the underlying tax demand.

Limits of this ruling

• Tax liability was left for fresh adjudication.
• The court did not invalidate all suo motu rectifications or harmless arithmetic corrections.