GST Proper Officer states 'Not Agreed With Taxpayer' But fails to Explain for Dropping Demand: Delhi HC Directs for Explanation [Read Order]
The court stated that the concerned Officer, after analyzing the issues at serial nos. (ii), (iii), and (iv), did not agree with the Petitioner but still dropped the demand in respect of the same.
The Delhi High Court has directed the Department to explain an inconsistency in an impugned order where the demand related to certain issues was dropped, as the assessing authority merely stated "Not Agreed with Tax Payer".
The petitioner, Fedral Bank Ltd., filed a writ petition challenging an impugned order dated February 22, 2025, which confirmed a total demand of Rs. 5,50,50,679 against them.
Mr. Joseph Kodianthara, the Senior Counsel for the Petitioner, submitted that the impugned order itself dropped some of the demands, but these dropped demands were still included in the impugned Form GSTDRC-07. He also informed the court that a rectification application filed by the Petitioner was rejected without a hearing.
The Court perused the impugned order and the Show Cause Notice dated November 21, 2024, which raised the following issues:
i) excess input tax credit (ITC) claimed due to non-reconciliation of information,
ii) ITC to be reversed on non-business transactions & exempt supplies,
iii) under declaration of ineligible ITC
iv) ITC claimed from cancelled dealers, return defaulters & tax non-payers.
The court noted that a demand of Rs. 43,41,537 was confirmed only in respect of issue at serial no. (i) (excess ITC claimed on account of non-reconciliation of information).
However, the demands related to issues at serial nos. (ii), (iii), and (iv) were dropped. The court found a prima facie contradiction in the impugned order, particularly regarding the issues where the demand was dropped.
The court observed the officer's observations for these issues were:
"Observations and conclusion of the assessing authority: Not Agreed with Tax Payer Specific reasons entered Based on the verification of submission provided. The demand has dropped.”
The court stated that the concerned Officer, after analyzing the issues at serial nos. (ii), (iii), and (iv), did not agree with the Petitioner but still dropped the demand in respect of the same.
The bench of Justice Prathiba M. Singh and Justice Shail Jain held that the Department would have to explain this inconsistency.
The court issued notice, which was accepted by Ms. Vaishali Gupta, Panel Counsel for the Department, who submitted that she would like to take instructions in the matter.
The Court also stated that if any coercive steps are taken in the meanwhile, the Petitioner is free to approach the Court. The matter is now listed for hearing on December 17, 2025.
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