Input tax credit reversal requires proper verification and rebuttal opportunity; untested departmental material cannot sustain revised assessment.

Revised assessment reversing input tax credit could not be sustained where it rested on unverified departmental information and lacked meaningful cross-verification of purchases and tax payment. The court held that denial of credit under the Tamil Nadu Value Added Tax Act requires proper enquiry, verification of records, and an effective opportunity to rebut adverse material. The proposed penalty was also linked to the same defective revision notice. The assessment was set aside, and the assessee was allowed to file objections and produce documents for fresh consideration in accordance with law.

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Issues: Whether the revised assessment and reversal of input tax credit could be sustained without adequate verification and whether the matter should be re-examined after granting the assessee an opportunity to file objections and produce records.

Analysis: The assessment was founded on information gathered from the department's website and on an assumption that the petitioner had issued invoices to different buyers and maintained parallel bill books, but the assessment proceeded without meaningful cross-verification. The statutory requirement under Section 19(1) of the Tamil Nadu Value Added Tax Act, 2006, for denial or reversal of input tax credit depends on proper verification of the purchases and tax payment, and the proposal to levy penalty under Section 22(5) of the same Act was also made on the basis of the impugned revision notice. In the circumstances, and applying the settled principle that adverse tax consequences should not be imposed without a proper enquiry and opportunity, the assessment could not be sustained in its present form.

Conclusion: The impugned assessment was not sustained, and the petitioner was given an opportunity to file objections and produce documents for a fresh assessment by the authority in accordance with law.

Ratio Decidendi: A revised tax assessment that affects input tax credit must rest on proper verification and opportunity of rebuttal, and cannot be sustained merely on untested departmental information.

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