Facts of the Case

The petitioner, Tvl. T. Sivakumar, a contractor registered under GST, challenged the assessment order dated 28.08.2024 relating to assessment year 2019-20. The impugned assessment was passed under Section 73 and was challenged as cryptic, barred by limitation, non-speaking, illegal, arbitrary and wholly without jurisdiction. The petitioner also sought a direction for fresh assessment after affording an opportunity of hearing.

The assessment had been completed ex parte because the petitioner did not utilise the opportunities provided during the assessment proceedings. As specifically recorded in the table on page 3 of the judgment, the dispute arose from an alleged mismatch between Form GSTR-07 and Form GSTR-09 for AY 2019-20. The respondent treated the differential turnover reflected in GSTR-07 as suppressed outward supplies and determined tax of ₹8,01,560, together with interest and penalty under Section 73 of the TNGST Act.

The petitioner’s explanation for non-participation was that the proceedings had been uploaded only on the GST portal and were never effectively communicated to him. Being a small civil contractor with limited GST knowledge, he had entrusted GST compliances to a part-time accountant, who allegedly failed to inform him regarding the notices, personal hearing and assessment proceedings. Consequently, the petitioner could not file objections, reconciliation statements or supporting documents, and the assessment order came to be passed ex parte.

Issues Involved

  1. Whether an assessment under Section 73 could be sustained where the alleged suppressed outward supplies were determined by comparing Form GSTR-07 with Form GSTR-09.
  2. Whether Form GSTR-07, being a TDS return filed by Government deductors, could by itself be treated as conclusive evidence of taxable turnover or suppressed outward supplies.
  3. Whether the comparison with a non-filed Form GSTR-09 was fundamentally erroneous where the petitioner claimed exemption from filing the annual return for AY 2019-20 under Section 44 of the CGST Act read with the relevant notifications.
  4. Whether the ex parte assessment order should be interfered with when the petitioner claimed that portal-uploaded proceedings were not effectively communicated and that the part-time accountant failed to inform him of the notices and hearing opportunities.
  5. Whether a fresh opportunity could be granted to the petitioner on equitable terms subject to deposit of a portion of the disputed tax.
  6. Whether consequential bank attachment made pursuant to the impugned assessment should continue after the assessment order was set aside.

Petitioner’s Arguments

The petitioner contended that he was not liable to file Form GSTR-09 for AY 2019-20 in view of the exemption available under Section 44 of the CGST Act and the relevant notifications. Therefore, according to the petitioner, comparing GSTR-07 with a non-filed GSTR-09 was fundamentally erroneous.

It was further argued that GSTR-07 is only a TDS return filed by Government deductors and cannot be treated as conclusive evidence of taxable turnover. Any variation could arise from timing differences, retention amounts, running bills and reporting practices followed by deductor departments.

The petitioner expressed readiness to furnish a complete reconciliation of GSTR-07 with GSTR-1, GSTR-3B and the books of accounts to establish that no turnover had escaped assessment.

Regarding failure to participate in the proceedings, the petitioner submitted that the proceedings were uploaded only on the GST portal and were never effectively communicated to him. Since GST compliances had been entrusted to a part-time accountant who failed to inform him about the notices, personal hearing and assessment proceedings, the petitioner could not submit objections, reconciliation statements or supporting documents. It was therefore contended that no real and meaningful opportunity of hearing had been availed before the ex parte order was passed.

Respondent’s Arguments

The learned Government Advocate appeared for the Revenue. The assessment order had proceeded on the basis that the petitioner failed to utilise the opportunities provided during the assessment proceedings. The Revenue’s case, as reflected in the impugned assessment and summarised by the Court, was that the differential turnover emerging from the alleged GSTR-07 and GSTR-09 mismatch represented suppressed outward supplies, warranting determination of tax of ₹8,01,560 together with interest and penalty under Section 73 of the TNGST Act.

The judgment does not record any further elaborate independent counter-submissions on merits beyond the Revenue’s representation through the learned Government Advocate and the basis of the impugned assessment. Accordingly, no additional respondent argument should be attributed beyond what is expressly reflected in the order.

Court Order / Findings

The Madras High Court considered:

  • the nature of the discrepancies noted in the assessment;
  • the explanation offered by the assessee on merits; and
  • the reason advanced for not availing the earlier opportunity.

The Court found 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 fresh opportunity was made conditional upon deposit of 25% of the disputed tax amount.

The writ petition was allowed on the following terms:

  1. Deposit of 25% disputed tax: Within four weeks of receiving the web copy of the order, the petitioner must deposit 25% of the disputed tax amount with the respondent, without waiting for a certified copy.
  2. Assessment order to stand set aside upon deposit: On such deposit, the impugned order dated 28.08.2024 shall stand set aside and the matter shall stand remanded to the respondent.
  3. Fresh participation by assessee: The assessee must appear before the respondent without fail and submit the reply and documents supporting the claim.
  4. Fresh adjudication: The respondent must consider the matter afresh and pass orders in accordance with law.
  5. Bank attachment raised: Since the impugned assessment order was set aside, any attachment of the bank account made pursuant to that order shall stand raised.
  6. No costs: No order as to costs was made, and the connected miscellaneous petitions were closed.

Important Clarification

This judgment should not be read as a final adjudication on the merits of whether a GSTR-07 vs GSTR-09 mismatch can legally establish suppressed turnover in every case. The Court did not finally determine the petitioner’s substantive reconciliation claim or conclusively rule that GSTR-07 can never form part of an assessment exercise. Instead, considering the nature of the discrepancy, the assessee’s explanation and the reason for non-participation, the Court granted a fresh opportunity on equitable grounds subject to a 25% pre-deposit condition.

It is also important that the petitioner’s contentions concerning exemption from filing GSTR-09 under Section 44, the evidentiary nature of GSTR-07, timing differences, retention amounts, running bills and deductor reporting practices were arguments/explanations placed by the assessee, not final findings conclusively accepted on merits by the Court. The Assessing Officer is required to examine the matter afresh after considering the reply, reconciliation and supporting documents.

Further, the setting aside of the assessment order was expressly linked to compliance with the condition requiring deposit of 25% of the disputed tax amount within the stipulated period.

Sections Involved

Section 73 of the CGST Act, 2017 / TNGST Act, 2017 – Proceedings relating to determination of tax in cases other than fraud, wilful misstatement or suppression of facts with intent to evade tax; the impugned assessment was passed under Section 73.

Section 44 of the CGST Act, 2017 – Annual return provision; relied upon in the petitioner’s explanation concerning claimed exemption from filing Form GSTR-09 for AY 2019-20 along with relevant notifications.

Article 226 of the Constitution of India – Constitutional writ jurisdiction invoked to challenge the impugned assessment order and seek certiorarified mandamus.

Link to download the order -https://www.mytaxexpert.co.in/uploads/1783067130_417compressed.pdf

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