Supreme Court Upholds Businesses’ Right to Rectify Tax Errors, Safeguards Buyers’ Input Tax Credit from Seller’s Mistakes
Supreme Court Upholds Businesses’ Right to Rectify Tax Errors, Safeguards Buyers’ Input Tax Credit from Seller’s Mistakes
The Supreme Court has upheld the businesses’ right to rectify tax errors, safeguards buyers’ input tax credit from seller’s mistakes.
The bench of the Chief Justice Sanjiv Khanna, Justice Sanjay Kumar and Justice K.V. Viswanathan has observed that has reinforced the fundamental right of businesses to rectify clerical or arithmetical errors in tax filings. The inadvertent mistakes in tax records should not lead to undue hardships, emphasizing that rectification is an essential aspect of conducting business and should not be restricted by technical limitations.
The ruling specifically addresses concerns regarding Input Tax Credit (ITC) under the Goods and Services Tax (GST) framework. The Court categorically stated that a seller’s mistake in reporting GST details cannot result in the denial of ITC to the buyer, particularly when the tax has already been paid to the government. It further clarified that in cases where no loss of revenue occurs, rectification should be permitted, and technical limitations within tax software should not be used as a pretext to reject legitimate claims.
The Supreme Court has also directed the government to revisit timelines for correcting bona fide errors in tax filings. The Court noted that unfair denial of ITC due to such errors places an unnecessary burden on businesses and purchasers.
Recognizing that human errors are inevitable—even within tax authorities—the Court appointed Senior Advocate Arvind P. Datar as Amicus Curiae to assist in the case.
This judgment is expected to provide significant relief to businesses facing ITC-related disputes due to minor errors and reinforces the principle that tax compliance should not become a punitive exercise over technical lapses.
Case Details
Case Title: The Union Of India & Ors. Versus Brij Systems Ltd & Ors.
Case No.: Special Leave Petition (Civil) Diary No. 6334/2025
Date: 24-03-2025
Counsel For Petitioner: Raghavendra P Shankar, A.S.G.
Counsel For Respondent: Ayush Agarwala
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
