Input tax credit disputes require a fair opportunity to prove invoice genuineness before adverse reassessment findings stand.

Input tax credit disallowance based on alleged bogus invoices could not be sustained without giving the assessee an effective opportunity to prove the genuineness of the invoices and underlying transactions. The statutory burden remained on the assessee to substantiate the claim with prescribed documents, but adverse findings could not be recorded before a fair hearing. The reassessment orders were therefore interfered with to the limited extent of the disputed input tax credit, and the matter was remitted for fresh adjudication on merits, while the remaining findings in the reassessment orders were left undisturbed.

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Issues: (i) Whether disallowance of input tax credit on the basis of alleged false or bogus invoices could be sustained without affording the assessee an effective opportunity to substantiate the claim. (ii) Whether the reassessment orders required interference and remand for fresh adjudication on the disputed input tax credit claims.

Issue (i): Whether disallowance of input tax credit on the basis of alleged false or bogus invoices could be sustained without affording the assessee an effective opportunity to substantiate the claim.

Analysis: The disputed input tax credit was rejected on the footing that the invoices were bogus and that the supplying dealers had not matched the declared turnover or remitted tax as expected. The statutory scheme placed the burden on the assessee to establish that the claim for deduction of input tax was correct and supported by the prescribed documents. Since that burden is to be discharged by the assessee, the adjudication required a fair opportunity to explain and prove the genuineness of the invoices and the underlying transactions before an adverse finding was recorded.

Conclusion: The disallowance could not be treated as conclusive against the assessee without such opportunity; the finding required interference.

Issue (ii): Whether the reassessment orders required interference and remand for fresh adjudication on the disputed input tax credit claims.

Analysis: The impugned reassessment orders had proceeded on a finding of false invoices, but that conclusion was reached before the assessee was effectively heard on the genuineness of the claim. The Court therefore found it appropriate to set aside the orders to the limited extent of the disputed input tax credit amounts and remit the matter to the assessing authority for re-examination on merits after the assessee deposited the disputed sums. The remand was confined to the input tax credit issue, while the remaining findings were left undisturbed.

Conclusion: The reassessment orders were interfered with to the limited extent of the disputed input tax credit and the matter was remitted for fresh adjudication.

Final Conclusion: The assessee obtained partial relief in the form of setting aside of the adverse finding on the disputed input tax credit and a remand for reconsideration, while the other findings in the reassessment orders were not disturbed.

Ratio Decidendi: An adverse tax finding on disputed input tax credit based on alleged bogus invoices should not be affirmed unless the assessee is afforded a fair opportunity to discharge the statutory burden of proof; where that opportunity was not effectively given, limited interference and remand for fresh adjudication are warranted.

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