penalty u/s 125

[FARIDUDDIN AHMAD]

sir my client received intimation u/s 61 for the period 2017 18 regarding mismatch in 3B Vs R1 due to non filing of GSTR-1. reply to which was not been flied by my client. however GSTR-1 has been flied after receiving intimation u/s 61. finally the officer has issued notice u/s 125 fixing penalty of Rs-50000/-(SGST + CGST) for the reason non compliance to the intimation u/s 61. kindly advise how to defend the notice u/s 125

[KASTURI SETHI]

Rs.25,000/- is the maximum penalty. Section 125 contains the words, 'may extend'. It means less penalty can be imposed.

The party has to prove that they have acted in a bona fide manner.

[Shilpi Jain]

You should be able to take shelter of section 126 to please no penal liability. See the provision below

No proper officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.

Explanation.––For the purpose of this sub-section,––

(a) a breach shall be considered a ‘minor breach’ if the amount of tax involved is less than five thousand rupees;

(b) an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record.

[KASTURI SETHI]

If Section 125 is invoked in the SCN, penalty has to be imposed by the Adjudicating Authority. Penalty may be nominal. Here the word, 'shall' contains the command.

[KASTURI SETHI]

Non-compliance or non-reply to the official notice/letter is a very very serious offence on the part of an assessee. It shows scant respect for the laws. However, if the reasons are genuine, the proper officer may take a lenient view by way of imposing less penalty.

The use of word, 'shall' in the statute indicates that it is mandatory and the Assessing Authority does not have power to dilute this mandatory requirement.------Supreme Court in the case of ALD Automobile (P) Ltd. 2018 (10) TMI 814 - SUPREME COURT. However, this judgement is in relation to the input credit. Here we are concerned with the meaning, essence and power of 'shall'

[Padmanathan KV]

In my opinion penalty under section 125 cannot be levied since it is covered under section 122(1)(xvii) which is a more specific entry : -

fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act;

The maximum penalty is Rs.10,000/- or amount equal to tax evaded. Since there is no tax evasion here, therefore, a maximum of only Rs.10,000/- can be levied.

This should only be an alternative argument and the primary argument should be to seek relief under section 126 as rightly explained by Shilpi Ma'am.

[KASTURI SETHI]

Section 61 of CGST Act seeks explanation from the registered person on account of discrepancies noticed in the return and NOT information or documents.

There is a world of difference between phrases 'seeking explanation' and 'asking information or documents'.

SCN has been issued for imposition of penalty under Section 125 because the Noticee/assessee has failed to take corrective measure.

[Amit Agrawal]

Non-response to notice u/s 61 per se is not a valid ground to impose penalty u/s 125.

Second, filing of Form GSTR-1 in itself is sufficient response to such notice u/s 61. This is with the understanding that there are no differences, now, between GSTR-1 (filed after notice u/s 61) & Form GSTR-3B (which was filed much earlier).

Of-course, one should also argue against penalty u/s 125 by using section 126.

These are ex facie views of mine and the same should not be construed as professional advice/suggestion.

[KASTURI SETHI]

The assessee has right of self defence.

How the proper officer perceives the whole scenario ? That has to be kept in mind while drafting reply to the notice.

[Amit Agrawal]

Dear Querist,

Kindly note Section 75 (7) of the CGST Act, 2017, which reads as follows:

"The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice."

So, you need to concentrate on the ground/s taken by Dept. in the SCN to impose penalty, while replying such SCN. If officer has made mistake in not taking proper grounds to propose penalty u/s 125, you need to exploit such mistakes while defending yourselves.

These are ex facie views of mine and the same should not be construed as professional advice/suggestion.

AI Summary

Penalty for non compliance with notice under section 61 can be challenged; subsequent filing of missing return may avert penalty.
Non response to an intimation under section 61 for return mismatches may lead to penalty proceedings under section 125, which permits imposition up to its maximum but allows the adjudicating authority to impose a lesser penalty if the assessee acted bona fide. Defences include reliance on relief for minor or easily rectifiable breaches, alternative penalty provisions limiting exposure for failure to furnish information, and that subsequent filing of the omitted return may rectify the default. Reply should target the specific grounds in the show cause notice and seek discretionary mitigation.