2024 (4) TMI 770 - HC - GST

Tax Assessment Overturned: Procedural Flaws Invalidate Authority's Rejection of Credit Notes and Compliance Evidence

M/s. Oasys Cybernetics Private Limited Represented by its Managing Director Mr. Elango Versus State Tax Officer, Chennai

HC Madras reviewed a tax assessment challenge involving discrepancies in GSTR returns and ITC reporting. The court set aside the assessment order, finding ... Validity Of Assessment order passed - discrepancies between the petitioner's GSTR 3B returns and the auto populated GSTR 2A - show cause notice - credit notes were erroneously reported as ITC - certificate produced by the Chartered Accountant rejected, without assigning any reasons - HELD THAT:- On examining the findings, I find that the explanation of the petitioner was not duly examined from the perspective of ascertaining whether the amount reflected as ITC tallies with the value of credit notes issued by the petitioner. If such exercise had been carried out, it would become clear as to whether there was revenue loss by way of excess availment of ITC. Since such exercise was not carried out and findings were recorded confirming the tax demand merely because credit notes were not duly reported in GSTR 1 or in the auto populated GSTR 2A, the impugned order calls for interference on this issue. As regards the provision of a Chartered Accountant's certificate to explain the discrepancy to the extent of about Rs. 53,18,913/-, the impugned order merely records that the certificate issued by the Chartered Accountant and the petitioner's reply are not accepted. It is unclear as to why the certificate was rejected because no reasons are discernible from the impugned order. Thus, the impugned order calls for interference and is hereby set aside. As a corollary, the matter is remanded for re-consideration by the respondent. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order after taking into consideration the contentions of the petitioner. Such order shall be issued within two months from the date of receipt of a copy of this order. W.P. is disposed of on the above terms. No costs. Consequently, W.M.P. are closed. Issues involved: Challenge to assessment order u/s 29.12.2023 regarding discrepancies between GSTR returns and auto-populated GSTR 2A.Summary:Issue 1: Discrepancies in reporting credit notes in GSTR returnsThe petitioner, engaged in supplying point of sale machines, received a show cause notice for discrepancies in GSTR returns. The discrepancy arose due to credit notes issued to recipients not being reflected correctly in GSTR 1 statements. The petitioner explained that credit notes were erroneously reported as Input Tax Credit (ITC) and provided supporting documents. The assessing officer reversed ITC of Rs. 4,08,39,428/- citing reporting errors. The court found that the assessing officer did not properly examine if the ITC amount tallied with credit notes issued, leading to interference with the impugned order.Issue 2: Rejection of Chartered Accountant's certificateThe petitioner submitted a certificate from a Chartered Accountant to explain a discrepancy of Rs. 53,18,913/-. However, the impugned order rejected the certificate without providing reasons. The court noted the lack of clarity in rejecting the certificate and set aside the order for reconsideration by the respondent, directing a reasonable opportunity for the petitioner to present their case.The High Court of Madras set aside the impugned order and remanded the matter for reconsideration by the respondent, emphasizing the need for a thorough examination of discrepancies and providing a reasonable opportunity to the petitioner for a fresh order within two months. The writ petition was disposed of with no costs, and related motions were closed.