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TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 926
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....the Revenue, impugning the order dated 13.10.2025 passed by the learned Single Judge in Writ Petition No. 26515/2024. 2.1 The sequence of events, the facts involved, and the reasons assigned by the learned Single Judge in both the cases are identical. Learned counsel on both sides addressed common arguments. Since the issues involved are identical, both the appeals are disposed of by this common order. 3. The facts in Writ Appeal No. 2126/2025 are referred to for the sake of convenience. 4. An inspection was conducted at the business premises of the respondent on 03.06.2024. In the course of the inspection, an ineligible claim of Input Tax Credit (ITC) was noticed. The respondent-assessee voluntarily reversed the ineligible ITC and thereafter paid interest and penalty on 10.06.2024. 4.1 In the meantime, summons was issued to the respondent under Section 70 of the Central Goods and Services Tax Act, 2017 (for short, 'the Act'). By letter dated 05.06.2024, the respondent sought extension of time. On 10.06.2024, the respondent submitted a letter requesting closure of the proceedings. The tax along with interest and penalty was paid under Section 74(5) of the Act. The state....
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....ly demonstrate that the respondent had availed ineligible ITC. It is further submitted that even assuming that coercion was exerted on 03.06.2024, the request for closure was made after seven days. The respondent had sufficient time to report such alleged coercion to the higher authorities. 5.3 It is contended that the mere allegation of coercion is not sufficient to accept such allegation and set aside the closure order. It is further submitted that if such baseless allegations are entertained, the very purpose of Sections 74(5) and 74(6) of the Act would stand defeated. 5.4 It is also submitted that the tax period involved is from January 2021 to February 2024. It is contended that the permissible actions pursuant to the inspection conducted on 03.06.2024 and the summons dated 04.06.2024, which would have been available had the request for closure not been made, ought to be made available if the order of closure is to be set aside. 6. Sri Harish B. Narasappa, learned Senior Advocate appearing for Sri Y.C. Shivakumar, learned counsel for the respondent, submits that an inspection was conducted on 03.06.2024 and that coercion and pressure were exerted on the representative....
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....cion and pressure for reversal of ITC is not sufficient. Such allegation requires corroborative evidence, and the surrounding circumstances must support the same. 8.3 The Madras High Court in Commissioner of Income-tax vs. MAC Public Charitable Trust and others, (2022 SCC OnLine Mad 8835), observed as under: "62. It is settled position of law that the admission though important is not conclusive. It is open to the assessee who made the admission to show that it is incorrect as held by the hon'ble Supreme Court in Pullangode Rubber Produce Company Ltd. v. State of Kerala [1973] 91 ITR 18 (SC). The onus falls on the person who had earlier admitted to prove it wrong. Therefore, the statements could form the basis of assessment. 63. The statements given to the Assessing Officer under section 132(4) have legal force. Unless the retractions are made within a short span of time, supported by affidavit swearing that the contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials, the same cannot be treated as retracted." 8.4 The Hon'ble Supreme Court, in K.T.M.S. Mohd. and another vs. Union of India, (1992) 3....
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....m 04.06.2024 to 10.06.2024. Such a course of action was also available even prior to the order of closure dated 27.08.2024. The respondent has maintained silence regarding the alleged coercion and involuntary declaration for more than two and a half months. The conduct of the respondent raises a serious doubt as to the genuineness of the allegation made. 8.6 In that view of the matter, we are of the opinion that a mere allegation is not sufficient unless the facts and circumstances, and the actions of the authorities or the assessee, indicate the presence of such force or coercion. In the light of the above judgments, we hold that a mere allegation of coercion to admit liability is not sufficient to hold that the declaration was involuntary. The existence of coercion must be established by other attending circumstances. Such a requirement is necessary to maintain the sanctity of the declaration made under Section 74(5) of the Act. If due importance is not accorded to a declaration made under Section 74(5), it may lead to unintended adverse consequences. 8.7 If we may illustrate for the sake of understanding: where the Proper Officer is entitled to initiate action under Sectio....
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....ion would ordinarily have granted some breathing time to reverse the ITC availed. 9.4 The reversal made while the inspection was ongoing lends some substance to the contention of the respondent. If the reversal of ITC had already been made, the payment of interest and penalty would follow as a consequence. Similarly, the filing of the letter under Section 74(5) would also follow. Though, in the case on hand, the payment of interest and penalty and the filing of the letter under Section 74(5) may not, by themselves, be said to be involuntary, the act of reversal of ITC in the presence of the Proper Officer during the course of inspection lends support to the statement of the respondent. 9.5 The Delhi High Court in Lovelesh Singhal (supra), considering that the reversal of ITC was made in the course of the inspection and when the authorities were present, held that the same could not be regarded as voluntary. In the present case also, the reversal of ITC was made during the ongoing inspection and presumably in the presence of the inspecting authorities. 9.6 In that view of the matter, for the reasons assigned hereinabove, we find no justification to interfere with the findin....