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02.09.2026: GSTR-2A Bengaluru mismatch cannot be sole basis for ITC disallowance; GSTAT sets aside demand for failure to verify FY 2017-18 credit and grant mandatory personal hearing

Facts of the Case:

In this case, the assessee was engaged in quarrying and sale of crushed stones, was subjected to proceedings for FY 2018-19 on the ground that ITC availed in GSTR-3B exceeded the ITC reflected in GSTR-2A. The Proper Officer treated the difference of ₹2,33,502 (CGST ₹1,16,751 and SGST ₹1,16,751) as excess ITC and confirmed tax, interest and penalty aggregating to ₹4,60,582 under Section 73.

The assessee contended that the alleged mismatch arose because ITC pertaining to FY 2017-18 was availed in FY 2018-19 within the permissible period under Section 16(4), and such credit was reflected in the GSTR-2A of FY 2017-18. The demand was confirmed without granting personal hearing, although the SCN itself recorded the hearing details as “NA”. The First Appellate Authority upheld the demand without examining the reconciliation. The assessee therefore approached the GSTAT.

Issue:

Whether ITC can be disallowed merely on the basis of a GSTR-3B and GSTR-2A mismatch for FY 2018-19 without verifying the assessee’s claim that the difference represented FY 2017-18 invoices availed within the permissible period under Section 16(4); and whether failure to grant a personal hearing under Section 75(4) vitiated the adjudication. A further issue was whether non-issuance of FORM GST ASMT-10 under Section 61 invalidated the proceedings.

Held That:

The GSTAT allowed the appeal by way of remand. It held that GSTR-2A, particularly for the relevant period, could not by itself be treated as conclusive evidence for disallowing ITC, and the assessee’s explanation regarding FY 2017-18 credit required invoice-wise verification. The Tribunal observed that the First Appellate Authority had proceeded on an assumption that non-reflection in FY 2018-19 GSTR-2A established non-payment of tax by suppliers, without undertaking the required verification.

More importantly, the Tribunal held that personal hearing under Section 75(4) is mandatory where an adverse decision is contemplated, and the absence of any hearing vitiated the adjudication. However, it held that non-issuance of FORM GST ASMT-10 did not invalidate the proceedings since Section 61 scrutiny and proceedings under Section 73 are independent routes.

Accordingly, the orders were set aside and the matter was remanded for de novo adjudication, directing invoice-wise verification with reference to FY 2017-18 GSTR-2A, suppliers’ GSTR-1, ITC registers, books of account and GSTR-9/GSTR-9C, along with application of CBIC Circular No. 183/15/2022-GST. The Proper Officer was also directed to provide a proper personal hearing and pass a fresh, reasoned order within twelve weeks. The consequential interest and penalty were directed to abide by the fresh determination of tax liability.

Case Name: M/s N. R. Builders Versus Commissioner of commercial taxes, Karnataka dated 31.08.2026

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