Facts of the Case

The petitioner, Tvl. Punitha Antony Store, represented by its proprietor Rajaprakash, challenged an assessment order dated 19.01.2026 relating to Assessment Year 2025-26. The assessment was passed ex parte because the petitioner had not utilised the opportunities provided during the assessment proceedings.

The respondent alleged excess availment of Input Tax Credit of Rs. 3,27,664/- under CGST and SGST on the basis of a mismatch between GSTR-3B and GSTR-2A. The difference was treated as ineligible ITC and reversal was proposed under Section 73 of the TNGST Act. The impugned assessment order itself was stated to have been passed under Section 74 of the TNGST Act, 2017.

As specifically reflected in the comparative table on page 3 of the judgment, the dispute involved three central aspects: the department’s allegation of excess ITC, the assessee’s explanation that supplier-side B2C/B2B reporting errors caused the mismatch, and the assessee’s explanation for failure to participate effectively in the proceedings.

Issues Involved

The principal issues before the Court were:

  1. Whether the ex parte assessment order should be sustained when the petitioner claimed that the GSTR-3B vs GSTR-2A mismatch arose from suppliers erroneously reporting B2B supplies as B2C transactions.
  2. Whether genuine ITC could be disputed merely because corresponding transactions did not properly reflect in GSTR-2A due to alleged supplier-side reporting errors.
  3. Whether the petitioner should be granted a fresh opportunity to submit explanations and supporting documents before the assessing authority.
  4. Whether the petitioner’s non-participation could be reconsidered in view of the claim that proceedings were uploaded through the GST portal, the petitioner was a small trader with limited portal knowledge, compliance work had been entrusted to a part-time accountant, and participation was affected by severe cervical issues.
  5. Whether equitable relief could be granted subject to a pre-deposit of 25% of the disputed tax amount.
  6. What consequence should follow regarding any bank account attachment made pursuant to the impugned assessment order.

Petitioner’s Arguments

The petitioner’s case on merits was that the alleged ITC mismatch did not arise from any wrongful or ineligible availment of credit. According to the petitioner, certain suppliers had incorrectly reported outward supplies as B2C transactions instead of B2B transactions.

It was contended that because of these supplier-side reporting mistakes, the corresponding ITC did not properly appear in GSTR-2A, notwithstanding that the underlying purchases were genuine. The petitioner asserted that verification of records maintained by both the petitioner and the suppliers would establish that the discrepancy was attributable solely to the suppliers’ reporting mistakes.

The petitioner further stated that supplier confirmations identifying the affected transactions were available and could be produced before the assessing authority.

Regarding non-participation, the petitioner explained that the proceedings were uploaded through the GST portal and no effective physical communication was received. The petitioner described itself as a small trader with limited knowledge of GST portal procedures and stated that GST compliance had been entrusted to a part-time accountant. The explanation recorded by the Court also referred to severe cervical issues affecting participation in the adjudication proceedings.

Respondent’s Arguments / Department’s Stand

The respondent’s assessment proceeded on the basis that the petitioner had allegedly availed excess ITC of Rs. 3,27,664/- under CGST and SGST for Assessment Year 2025-26 because of a mismatch between GSTR-3B and GSTR-2A.

The disputed difference was treated as ineligible ITC, with reversal proposed under Section 73 of the TNGST Act. The assessment was completed ex parte because, according to the proceedings recorded in the judgment, the petitioner had failed to utilise the opportunities afforded during adjudication.

Court Order / Findings

The Madras High Court considered:

  • the nature of the discrepancies;
  • the explanation offered by the assessee on merits; and
  • the reasons placed before the Court for not availing the earlier opportunity.

The Court held that an opportunity could be granted to the assessee to present submissions and produce relevant supporting documents before the respondent assessing officer. The Court observed that such opportunities had been extended on equitable grounds, though subject to appropriate conditions.

Accordingly, the Court granted relief on the condition that the petitioner deposit 25% of the disputed tax amount.

The writ petition was allowed on the following terms:

  • The petitioner shall, within four weeks from the date of receipt of a web copy of the order, deposit 25% of the disputed tax amount with the respondent, without waiting for a certified copy.
  • Upon such deposit, the impugned assessment order dated 19.01.2026 shall stand set aside.
  • The matter shall stand remanded to the respondent.
  • The assessee shall appear before the respondent without fail and submit its reply and supporting documents.
  • The respondent shall consider the matter afresh and pass orders in accordance with law.
  • Since the impugned assessment order was set aside, any attachment of the bank account made pursuant to that order shall stand raised.
  • No costs were awarded, and the connected miscellaneous petition was closed.

Important Clarification

This judgment is significant because the Court did not finally adjudicate the substantive admissibility of the disputed ITC on merits. It did not conclusively hold that every GSTR-3B vs GSTR-2A mismatch caused by supplier reporting errors automatically entitles a taxpayer to ITC.

Instead, the Court found that, considering the nature of the discrepancy, the assessee’s explanation, and the reasons for non-participation, a fresh opportunity should be granted to place the reply and supporting evidence before the assessing officer.

Therefore, the operative relief is a conditional remand, not an unconditional declaration of ITC eligibility. The impugned order stands set aside upon deposit of 25% of the disputed tax amount, after which the assessing authority must reconsider the case afresh in accordance with law.

A further important consequence expressly directed by the Court is that any bank account attachment made pursuant to the set-aside assessment order shall stand raised.

Sections Involved

Section 74 of the TNGST Act, 2017: The impugned assessment order dated 19.01.2026 was challenged as an order passed under this provision.

Section 73 of the TNGST Act, 2017: The judgment records that the alleged GSTR-3B vs GSTR-2A ITC difference was treated as ineligible ITC and reversal was proposed under this provision.

Article 226 of the Constitution of India: The writ petition was instituted seeking a Writ of Certiorari to call for the assessment records and quash the impugned order.


Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783058609_356compressed.pdf

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