Documents to Defect of Zero Rated Supplies without Tax Payment Sufficiently annexed in Reply to Income Tax: Madras HC sets aside Assessment Order [Read Order]

The Madras High Court has nullified an Income Tax Assessment order. In its ruling, the court highlighted that the documents pertaining to the issues of zero-rated supplies without tax payment and trade receivables were adequately included in the response to the income tax notice.

The petitioner, subject to an audit of their returns for the assessment periods 2017-18 to 2021-22, contested the validity of the order based on several grounds, chiefly centred around the purported non-adherence to statutory provisions and failure to consider the petitioner’s submissions adequately.

The petitioner’s counsel contended that the audit observations were not shared with the petitioner, contravening Section 65 of the Tamil Nadu Goods and Services Tax Act, read with Rule 101(5) of the associated rules.

Additionally, it was argued that the contentions raised in response to the final notice were disregarded in issuing the impugned order, and no opportunity for a personal hearing was provided thereafter.

The Counsel argued that the petitioner provided ample evidence, including a detailed ledger and electronic copies of invoices, in response to the issue of trade receivables. They dispute the finding of inadequate documentation on page 112.

Additionally asserted that documents such as the SEZ invoice and a letter of undertaking were submitted regarding zero-rated supplies without tax payment. They claim these documents were ignored during the confirmation of the tax demand due to a lack of consideration for supporting evidence.

Responding to these contentions, the Government Advocate pointed out the petitioner’s delayed response to the final notice, received just before the expiration of the specified deadline. This delayed submission, it was argued, hindered the consideration of the petitioner’s response within the prescribed time frame.

Considering the submissions and examining the impugned order and the arguments presented, a single bench of Justice Senthilkumar Ramamoorthy found merit in the petitioner’s contentions. It noted discrepancies between the documents submitted by the petitioner and the findings recorded in the order. The failure to consider the petitioner’s submissions and documents rendered the assessment order unsustainable.

Consequently, the court set aside the assessment order dated 30.12.2023, invalidating the subsequent recovery notice. The matter was remanded for reconsideration, with a directive to afford the petitioner a reasonable opportunity, including a personal hearing. The respondent authority was instructed to issue a fresh order within two months, incorporating due consideration of the petitioner’s submissions and evidence.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates