AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1810
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....A(1) of the CGST Rules, 2017 (hereinafter referred to as the 'Rules'). By that order, the Assistant Commissioner, CGST (ZY05), Mirzapur has blocked Input Tax Credit (ITC) Rs. 2,68,416/- available to the petitioner in its Electronic Credit Ledger (ECL in short). 4. Short ground pressed in the petition is that the above extreme action taken by the revenue authority, is devoid of jurisdiction. In any case no 'reason to believe' has been recorded nor any tangible material exists in the hands of respondent no.3 as may have led that authority to form a 'reason to believe' that the ITC (in ECL) available to the petitioner had been fraudulently availed or that the petitioner was otherwise ineligible to such ITC. At present, ....
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....reason to believe' has been 'recorded in writing' by respondent no.2, to block the ITC of the petitioner. Once the Rule requires 'reasons to believe' to be 'recorded in writing', the jurisdiction and authority to be exercised under Rule 86A of the Rules must subscribe to that mandatory condition. Though such reasons may be recorded ex-parte against the assessee, at the same time, the requirement of the statute to record the reasons is a non-negotiable condition. It is wholly mandatory. As to what constitutes 'reason to believe' is not a matter of speculation, especially in this branch of law. 11. On that principle, in The Commissioner of Sales Tax, U.P. Vs M/S. Bhagwan Industries (P) Ltd., Luckno....
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....the sufficiency of reasons for the belief. At the same time, it is necessary to observe that the belief must be held in good faith and should not be a mere pretence." 12. As to the material that may give rise to a "reason to believe" that any part of the turnover of an assessee escaped assessment to tax, the Supreme Court in the case of State of Uttar Pradesh And Others Vs. Aryaverth Chawal Udyog & Others (2015) 17 SCC 324 has observed in paragraph nos.28 and 30, thus: "28. This Court has consistently held that such material on which the assessing authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by the assessing authori....
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....ger, namely, "Supplier found non-functioning", does not fulfill the requirement of Rule 86A(1) of the Rules, to the extent it does not reflect any application of mind to reach that conclusion. Though it may be true that the respondent no.2 had received intimation dated 13.06.2025 from the DGGI, Raipur Zonal Unit, perusal of that communication (as extracted above) only reflects a generic/non-specific conclusion drawn by that authority. Thus, the said communication reflects a conclusion that a supplier - M/s Maa Kamakhaya Trading, Sarguja has passed on fraudulent ITC without supplying any goods, on the basis of bogus invoices, etc. That the goods claimed to have been supplied to the petitioner by the said supplier M/s Maa Kamakhaya Trading, S....
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....assessee and disrupt the entire value addition chain and consequentially tax payments without fulfilling the mandatory requirement of law - to record 'reasons to believe', 'in writing'." 9. Seen in that light, at present, no reason may have been recorded by the respondent no.3. By merely stating that he has acted as recommended by the Superintendent (AE), Mirzapur, it has been indicated otherwise. Thus, the said respondent has acted on the dictate or a recommendation, without anything more. Unless application of mind had been made by the authority passing the order to block the ITC of the petitioner and unless 'reason to believe' was recorded by that authority, considering such material, the petitioner's remed....