Input tax credit reversal for mismatch fails without disclosure of discrepancies and a fair hearing before adverse action.

Input tax credit reversal based on mismatch could not be sustained where the mismatch particulars were not furnished to the assessee and no hearing was granted. The prescribed mismatch procedure under Circular No. 5/2021 required verification of data at both ends, issue of notice, opportunity to show cause, and a personal hearing before any adverse order. As those safeguards were not followed, the reversal was set aside and the matter remitted for de novo reconsideration after disclosure of the mismatch details and an opportunity of hearing.

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Issues: Whether the assessment order could be sustained insofar as it reversed input tax credit on the basis of mismatch, without furnishing the mismatch particulars and without affording a hearing, and whether the matter required reconsideration in terms of the departmental circular governing mismatch cases.

Analysis: The reversal of input tax credit rested on a mismatch between the dealer's return and the sellers' annexures, but the mismatch details were not furnished to the assessee and no hearing had been granted. Circular No. 5/2021 dated 24.02.2021 prescribes a specific procedure for verification and resolution of mismatch cases, including verification of data at both ends, issue of notice, opportunity to show cause, and a personal hearing before any adverse order is made. In the absence of compliance with that procedure and the requirements of fair hearing, the reversal could not be allowed to stand.

Conclusion: The reversal of input tax credit was set aside and the matter was directed to be reconsidered de novo after furnishing the mismatch details and granting the assessee an opportunity of hearing.

Final Conclusion: Relief was granted only on the input tax credit reversal issue, and the assessment was sent back for fresh consideration in accordance with the prescribed mismatch procedure.

Ratio Decidendi: An adverse assessment based on mismatch cannot be sustained unless the discrepancy is disclosed to the assessee and the prescribed procedure is followed by granting notice, hearing, and an opportunity to reconcile the mismatch.

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