ITC Fraud Occurred After Adverse Verification Report: Allahabad High Court Quashes Suspension of State Tax Officer

The Allahabad High Court has set aside the suspension of a State Tax Officer, observing that prima facie the chronology of events did not justify continuation of suspension when the officer had already submitted an adverse verification report prior to the alleged fraudulent claim of Input Tax Credit (ITC). The bench of Justice Vikas Budhwar has observed that continuation of suspension was not warranted, especially since a charge sheet had already been issued and departmental proceedings could proceed independently. The petitioner, Avinash Sagar, was posted as State Tax Officer, Block-3, Gorakhpur. An application for GST registration was submitted by a firm, Dinesh Enterprises, on December 12, 2024. The registration was granted deemed approval on January 12, 2025. Subsequently, the petitioner conducted a physical verification of the firm on February 15, 2025, and submitted an adverse report the same day, allegedly indicating that the firm was bogus. Despite this, the firm claimed ITC on February 18, 2025. Later, a show cause notice was issued by the Assistant Commissioner on July 9, 2025, and the GST registration was cancelled on July 24, 2025. However, on August 4, 2025, the Commissioner, State Tax, Uttar Pradesh, Lucknow placed the petitioner under suspension in contemplation of disciplinary proceedings. A charge sheet had already been issued on August 1, 2025. The petitioner contended that once he had conducted the physical inspection and submitted the adverse report on February 15, 2025, he could not be held responsible for the fraudulent ITC claim made thereafter. It was argued that the delay in issuing the show cause notice and cancelling the registration was attributable to the higher authorities, and not to the petitioner. He further submitted that mere delay in conducting physical verification could not amount to grave misconduct warranting suspension, particularly when the alleged fraud occurred after submission of his report. The State acknowledged that the adverse report had been submitted on February 15, 2025, the ITC was claimed on February 18, 2025, and the show cause notice was issued only on July 9, 2025. The Court noted that the facts were undisputed. It observed that prima facie the sequence of events demonstrated that the fraudulent ITC claim was made after the petitioner had already submitted his adverse report. The High Court set aside the suspension order dated August 4, 2025. The court directed that the departmental proceedings be concluded within three months from February 27, 2026. The court ordered that no unnecessary adjournments be granted during the inquiry and directed payment of subsistence allowance to the petitioner from the date of suspension till the date of the Court’s order, subject to applicable rules. The court recorded the petitioner’s undertaking to cooperate in the disciplinary proceedings without seeking unnecessary adjournments. Case Details Case Title: Avinash Sagar Versus State of UP Citation: JURISHOUR-24-HC-2026(All) Case No.: WRIT - A No. - 1560 of 2026 Date: February 18, 2026 Counsel For Petitioner: Prashant Mishra Counsel For Respondent: C.S.C. Click Here To Read Order Read More: CBIC Releases FAQs on Newly Introduced Customs Reforms Under Budget 2026

ITC Fraud Occurred After Adverse Verification Report: Allahabad High Court Quashes Suspension of State Tax Officer

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ITC Fraud Occurred After Adverse Verification Report: Allahabad High Court Quashes Suspension of State Tax Officer

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