Input tax credit on crossing turnover limit must be reconsidered under the Commissioner's circular

Where turnover crosses the prescribed limit during the year, the assessee ceases to be assessed at the compounded rate and becomes entitled to input tax credit from the beginning of the year, according to the Commissioner's circular. The circular was treated as binding on the assessing authority, so the assessment required reconsideration in line with that clarification. Because the rectification petition lacked particulars on the month in which the limit was crossed, the assessee was directed to supply the turnover details for proper re-determination.

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Issues: Whether the assessee, on crossing the turnover limit of Rs. 50,00,000 during the relevant year, was entitled to input tax credit and whether the assessment had to be reconsidered in the light of the Commissioner's circular.

Analysis: The assessment order proceeded on the footing that the assessee was not eligible for the compounded rate once the turnover exceeded the prescribed limit. The circular issued by the Commissioner clarified that once the turnover crossed the limit in the middle of the year, the assessee would cease to be assessed at the compounded rate and would be entitled to input tax credit from the beginning of the year. As the admitted turnover exceeded the limit, the clarification was binding on the assessing authority and the assessment required reconsideration in accordance with law and the clarification. Since the rectification petition did not contain sufficient particulars as to the exact month in which the limit was crossed, the assessee was directed to furnish those details for proper re-determination.

Conclusion: The assessment order was set aside and the matter was directed to be reconsidered after the assessee furnished the turnover details.

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