Duplication Found in Turnover Reconciliation and GSTR 3B and Form 26AS: Madras HC sets aside GST Demand Order on Pre-deposit Condition [Read Order]

The Petitioner, Vadim Infrastructure Private Limited, engaged in engineering and construction services, challenged the assessment order dated 31.12.2023 is assailed primarily on the ground of breach of principles of natural justice.

The petitioner’s counsel highlighted key observations from the audit notice and observations dated 22.08.2023, emphasizing turnover reconciliation and variations between the GSTR 3B return and Form 26AS as principal concerns.

It was noted that the petitioner responded on 25.09.2023, clarifying that turnover encompassed business operations across India under multiple GST registrations, and similar clarifications were provided regarding the comparison between GSTR 3B return and Form 26AS.

The Counsel further pointed out potential duplication in these observations and stressed that the tax demand primarily stemmed from issues related to turnover reconciliation and differences between the GSTR 3B return and Form 26AS. Hence, counsel urged for an opportunity to effectively contest the tax demand.

Mr. C. Harsha Raj, the Additional Government Pleader, acknowledged the notice on behalf of the respondents. He highlighted that the petitioner had been given ample opportunities to contest the tax demand.

Referring to audit observations and reports, he noted the petitioner’s failure to respond to the show cause notice and provide essential documents regarding turnover from Tamil Nadu. Mr. Harsha Raj emphasised that the petitioner had statutory remedies available and had not sufficiently justified interference under Article 226 of the Constitution of India.

In the impugned order, the respondents noted the petitioner’s failure to provide documents regarding turnover from Tamil Nadu. While acknowledging this, the court found prima facie evidence suggesting that the tax demand was confirmed based on total turnover from the petitioner’s profit and loss account.

Additionally, the court identified potential duplication between turnover and discrepancies in GSTR 3B return and Form 26AS. Consequently, the court deemed it fair to grant the petitioner another opportunity, albeit with conditions, to contest the tax demands.

The petitioner’s counsel proposes remitting 10% of the disputed tax demand for all issues except turnover reconciliation and differences between the GSTR 3B return and Form 26AS, for which they suggest remitting 5% of the disputed tax demand.

A single bench of Justice Senthilkumar Ramamoorthy sets aside the impugned order on following conditions:

1. The respondent was permitted to take 10% of the disputed tax demand, excluding turnover reconciliation and differences between GSTR 3B return and Form 26AS, from the petitioner’s attached bank account. For turnover reconciliation and differences in GSTR 3B returns and Form 26AS, 5% of the tax demand can be appropriated from the same account.
2. Upon realisation of the above amounts, which shall be retained
3. subject to the outcome of the remanded proceedings, the attachment of the bank account shall stand raised.

The court directed the petitioner to submit a response with all necessary documents within three weeks. Following this, the second respondent must afford the petitioner a fair chance, including a personal hearing, and subsequently issue a new order within two months of receiving the petitioner’s reply. Accordingly, the writ petition was dismissed.

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