2024 (3) TMI 580 - HC - GST

Tax Authority Must Recalibrate Assessment After Procedural Flaws, Order Directs Fresh Evaluation with 10% Deposit and Reasonable Hearing

HC quashed assessment order for tax demand related to ITC return discrepancies. Court directed petitioner to deposit 10% of disputed tax, allowed response ... Demand of GST - Discrepancy between the GSTR-3B returns and the auto populated GSTR-2A returns - No opportunity to contest the tax demand - Breach of principles of natural justice - Not adhered the circulars - Petitioner unable to respond Show cause notice issued - Not aware of the same since the petitioner was entirely dependent on his accountant -business of supply of base metals - HELD THAT:- From the impugned assessment order, it is evident that the entire tax demand pertains to the disparity between the ITC claimed in the GSTR-3B return and that reflected in the auto populated GSTR-2A returns. The impugned assessment order does not indicate that the transaction was not genuine. Learned counsel for the petitioner also contended that applicable circulars were not adhered to in this regard. Thus, albeit by putting the petitioner on terms, I am of the view that the petitioner should be provided an opportunity to contest the tax demand. Therefore, the impugned assessment order is quashed subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to within a maximum period of two weeks from the date of receipt of a copy of this order. The petitioner is also permitted to file a reply to the show cause notice within the aforesaid period. Writ Petition is disposed of on the above terms. Issues involved: Assessment order challenged on grounds of breach of natural justice principles and non-adherence to circulars regarding GSTR-3B and GSTR-2A returns procedure.Summary:The petitioner, a registered person in the business of supplying base metals, contested an assessment order for the year 2019-20, which raised concerns about Input Tax Credit (ITC) claimed in GSTR-3B returns versus GSTR-2A returns. The petitioner, reliant on their accountant, missed responding to the notice and show cause due to lack of awareness. The petitioner argued lack of opportunity to contest the tax demand and non-compliance with circulars on procedures for return disparities.The court noted that the tax demand was solely based on ITC differences between returns without questioning the transaction's genuineness. Acknowledging the petitioner's claim of circular non-adherence, the court decided to give an opportunity to contest the tax demand, with a condition to remit 10% of the disputed tax within two weeks. The petitioner was allowed to respond to the show cause notice within this period. Upon compliance and satisfaction, the assessing officer was directed to conduct a fresh assessment within two months, ensuring a fair opportunity for the petitioner, including a personal hearing.The impugned assessment order was quashed, subject to the specified condition and timelines. The petitioner was granted the chance to contest the tax demand, ensuring procedural fairness. The case was disposed of with no costs, and related motions were closed accordingly.