Input tax credit mismatch disallowance requires meaningful verification and hearing before credit is denied and penalty is proposed.

Input tax credit disallowance based on purchase and sales mismatch cannot stand where the assessing authority fails to verify invoice particulars, dealer status and other relevant transaction details before drawing adverse inference. The record showed that the dealer had furnished transaction data and sought verification, but no meaningful enquiry into the other end dealers was undertaken and the mandatory examination in mismatch cases was not carried out before credit was denied and penalty proposed. The assessment orders were therefore set aside and the matter was remanded for fresh consideration with personal hearing and verification of the relevant materials.

---

---

Issues: Whether the assessment orders disallowing input tax credit on the basis of purchase and sales mismatch, without adequate verification of the transaction details and the other end dealers, were liable to be set aside and remanded for fresh consideration.

Analysis: The assessment was founded on alleged mismatch in Annexure-I and Annexure-II entries and on the conclusion that the dealer had not produced sufficient proof of tax payment to the sellers. The record showed that the dealer had produced transaction particulars and had requested verification of the purchase invoices and the details of sellers, many of whom were stated to be registered within the same assessment circle. The assessment order reflected no meaningful verification of the relevant facts, including the status of the other end dealers, and the mandatory enquiry contemplated in mismatch cases was not undertaken before disallowing the credit and proposing penalty. The matter also called for a proper opportunity of hearing and thorough examination of the collected materials.

Conclusion: The assessment orders were unsustainable and were set aside. The matter was remanded to the respondent for fresh consideration with opportunity of personal hearing and verification of the relevant details.

---