Fake ITC Availment: Delhi HC allows Bail and refuses Re-arrest [Read Order]

The Delhi High Court allowed the bail and refused to allow the rearrest of the accused, alleged to have made a fake /bogus availment of Input Tax Credit (ITC). The petition has been filed by the Directorate General of GST Intelligence, seeking cancellation and setting aside of the regular bail granted to the respondent, Yogesh Kumar Gupta, by order dated 3rd March, 2025 passed by the CJM, New Delhi District. Allegedly, the Respondent is the mastermind of a fraudulent billing racket, operating through 16 firms/ companies, engaged in the practice of issuing GST invoices without the actual supply of goods or services. This operation is executed in a planned and systematic manner, with an intent to defraud the government exchequer. The Respondent has also been playing an active role in passing of fraudulent ITC. The Respondent was arrested based on the evidence obtained from his mobile phone as well as his statement dated 27th January, 2025, in which he admitted to be involved in the availing and passing on of fake/bogus ITC. Furthermore, during a search of the office premises of Mr. Rakesh Kumar Aggarwal, who is also alleged to be involved in the fraudulent billing network, his statement was recorded, in which he confirmed that most of the fake/bogus invoices issued by the fraudulent companies were routed through the Respondent. Income Tax Authorities Failed to Determine Whether Taxed Amount is Lottery Win or Corporate Gift: ITAT Sends Matter Back to AO for Fresh Consideration GST READY RECKONER: Complete Topic wise Circulars, Instructions & Guidelines Click here The Petitioner has approached the court seeking the setting aside of the impugned order dated 3rd March, 2025. Mr. Harpreet Singh, Senior Standing Counsel for the DGGI, contended that the Respondent was granted bail in an arbitrary manner and in undue haste, without adequately considering the contentions and submissions made by the Petitioner before the CJM. It was stated that while the Respondent has the right to file successive applications for bail, the second application did not present any new grounds that would warrant a different opinion by the CJM. Since there were no material changes in the circumstances since the dismissal of the first bail application, the grant of bail to the Respondent was unwarranted. The respondent argued that the bail granted to the Respondent should not be cancelled in a mechanical manner, as the Petitioner has failed to demonstrate a compelling reason to continue the Respondent’s judicial custody, particularly since his statement has already been recorded twice. He argues that there is no perversity in the impugned order, and the allegations made by the Petitioner regarding the legality of the order are unfounded. The only argument the Petitioner has raised for seeking the cancellation of bail, that the first bail application was rejected on 24th February, 2025, and the second bail application was filed on 1st March, 2025, does not constitute a valid basis for challenging the bail order. Know Practical Aspects of Tax Planning, Click Here The first bail application of the Respondent was rejected on 24th February 2025, and immediately thereafter, on 25th February, 2025, the remand of the Respondent was extended for 14 days. The second bail application was filed just three days following the dismissal of the first application. The CJM, in the first bail application, observed that the investigation is at an initial stage qua the Applicant and the offence is grave and serious in nature. Based on these observations, the CJM dismissed the Respondent’s bail application. In the impugned order, the CJM primarily relied on the fact that no substantial investigation had been carried out qua the Respondent after 30th January 2025, and that no case diary had been written after 24th February, 2025. The CJM had observed that it appeared the Investigating Officer was merely seeking permission from senior officers for the provisional attachment of the suspected firms under Section 83 of the CGST Act. Even if the relevant date for assessing the change in circumstances is considered to be 15th February 2025, rather than the date the first bail order was passed, the Court finds no new circumstances that would warrant a decision differing entirely from the one in the first application. The single bench of Justice Sanjeev Narula proceeds to examine as to whether the Respondent is now required to be re-arrested and committed to custody. On this issue, Mr. Harpreet Singh has apprised the Court that the investigation is now complete, and the Petitioner department is on the verge of filing a prosecution complaint. As previously mentioned, the Petitioner department, on 28th February 2025, with permission from the CJM, Patiala House Courts, recorded the Respondent’s statement while he was in judicial custody. How to Audit Public Charitable Trusts under the Income Tax Act Click Here Consequently, the Court believed that significant time had elapsed since the issuance of the impugned order. Therefore, in light of the developments noted above, it is not warranted to curtail the Respondent’s liberty by ordering his re-arrest. Accordingly, it is clarified that the Respondent shall continue to be on bail under the same terms and conditions noted in the impugned order dated 3rd March, 2025. However, the observations made by the CJM regarding a material change in circumstances were thereby set aside. 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Fake ITC Availment: Delhi HC allows Bail and refuses Re-arrest [Read Order]

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Fake ITC Availment: Delhi HC allows Bail and refuses Re-arrest [Read Order]

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