Extended limitation based on ST-3 and Form 26AS mismatch fails where filed returns and reply were ignored and mismatch was explainable.

An extended-period demand based on an alleged mismatch between ST-3 returns and Form 26AS was unsustainable where the assessee had already filed the returns and enclosed them with the reply to the show cause notice. The adjudicating authority proceeded ex parte without examining the reply or the available record, and the notice wrongly assumed that no returns had been filed. The turnover difference was also capable of explanation because ST-3 returns and Form 26AS reflect different accounting bases, namely accrual and receipt. In these circumstances, there was no basis to allege suppression or failure to disclose taxable turnover, so the extended period of limitation could not be invoked and the demand failed.

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Issues: Whether the show cause notice and consequent demand were sustainable when the department failed to consider the assessee's already filed ST-3 returns and reply, and whether the extended period of limitation could be invoked on the basis of a turnover mismatch between ST-3 returns and Form 26AS.

Analysis: The record showed that the assessee had filed ST-3 returns and had enclosed them with the reply to the show cause notice, yet the adjudicating authority proceeded ex parte without examining the available departmental records or the reply. The notice proceeded on the premise that returns had not been filed, which was contrary to the record. The difference between the turnover reflected in ST-3 returns and Form 26AS was also capable of explanation, since the two were based on different accounting concepts, namely accrual basis and receipt basis. In these circumstances, there was no basis to allege failure to disclose taxable turnover so as to justify invocation of the extended period.

Conclusion: The extended period of limitation was not invokable, and the demand based on the impugned notice could not be sustained. The appeal was entitled to succeed.

Ratio Decidendi: Where the assessee's returns and reply are already on record and the department fails to examine them, a mechanically issued notice cannot support invocation of the extended period of limitation, especially when the apparent turnover mismatch is explainable by differing accounting bases.

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