The Madras High Court has held that the tax demand required reconsideration after discrepancies emerged between the Input Tax Credit (ITC) reflected in the taxpayer’s records and the figures relied upon in the assessment order.

The bench Justice Senthilkumar Ramamoorthy has recorded that the ITC available in GSTR-2A appeared to be approximately Rs. 9,208.21 towards IGST and Rs. 15,12,012 each towards CGST and SGST. Against this, the apparent excess utilisation was approximately Rs. 1,89,562.50 each towards CGST and SGST.

The petitioner challenged the assessment order, arguing that the tax authorities had failed to appreciate that a clerical error had occurred while filing the annual return. During the proceedings, the petitioner’s counsel placed before the court details concerning the ITC available through the auto-populated GSTR-2A and the ITC utilised through GSTR-3B.

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According to the submissions recorded by the court, the actual excess utilisation of ITC was stated to be approximately Rs. 1,89,562.50 each under CGST and SGST. The petitioner contended that the assessment order, however, proceeded on the basis that no ITC was available, apparently relying on the annual return alone.

The court was also informed that these ITC particulars had been furnished during the rectification proceedings. Without prejudice to its contentions, the petitioner agreed to remit an additional Rs. 3 lakh towards the disputed tax demand. It was also submitted that 10 per cent of the total demand had already been paid while filing the appeal.

The High Court found prima facie support for the petitioner’s contention that the ITC position was different from what had been reflected in the disputed assessment.

The High Court noted that, after taking into account the ITC available according to the annual return, the assessment order had nevertheless confirmed a much larger tax proposal. In view of this discrepancy, the court concluded that the matter warranted reconsideration.

The High Court accordingly directed that the impugned original assessment order be set aside, subject to the petitioner’s undertaking to remit an additional Rs. 3 lakh.

The court further directed that the taxpayer must be given a reasonable opportunity of being heard before a fresh order is passed. The fresh order is to be issued within five months from the date on which the additional Rs. 3 lakh is remitted.

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