M/S. OASYS CYBERNETICS PRIVATE LIMITED REPRESENTED BY ITS MANAGING DIRECTOR MR. ELANGO
VERSUS
STATE TAX OFFICER, CHENNAI
Tax Demand Cannot Be Confirmed Without Proper Examination of Discrepancies and Personal Hearing
Citation: 2024 taxo.online 705
The High Court of Madras, presided over by Justice Senthilkumar Ramamoorthy, addressed the case of M/s OASYS Cybernetics Private Limited v. State Tax Officer, Chennai (W.P.No.9624 of 2024 and W.M.P.Nos.10656 & 10657 of 2024, dated 12.04.2024). The petitioner, engaged in supplying and installing point-of-sale machines in ration shops operated by the Tamil Nadu Civil Supplies Corporation, faced a show cause notice (SCN) for the assessment period 2017-18. The SCN demanded the reversal of Input Tax Credit (ITC), interest, and penalties due to discrepancies between the petitioner’s GSTR 3B returns and the auto-populated GSTR 2A.
The petitioner responded on 10.10.2023 and 17.10.2023, explaining that the discrepancy arose from several factors, including the incorrect reporting of credit notes under the B2C (others) heading instead of under Heading 9B in the GSTR-1 statements. This error was inadvertent and resulted in no revenue loss as the credit notes were mistakenly reported as ITC. Despite submitting a certificate from a Chartered Accountant in compliance with Circular No.183, the Assessing Officer issued an order on 29.12.2023, confirming the demand without accepting the petitioner’s explanation.
The Court observed that the Assessing Officer did not properly examine whether the amount reflected as ITC tallied with the value of the credit notes issued by the petitioner. Instead, the officer confirmed the tax demand merely because the credit notes were not duly reported in the GSTR-1 or the auto-populated GSTR-2A. Additionally, the Chartered Accountant’s certificate was rejected without any clear reasons.
The Court set aside the impugned order and remanded the matter for reconsideration. The respondent was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and to issue a fresh order taking into account the petitioner’s contentions. This order must be issued within two months from the date of receipt of a copy of the Court's order.
This judgment highlights the importance of due process and fair examination in tax assessment cases. It emphasizes that procedural errors, such as incorrect reporting of credit notes, should not automatically result in adverse tax demands if there is no actual revenue loss. The decision underscores the need for tax authorities to provide clear reasoning when rejecting evidence, such as Chartered Accountant certificates, and to ensure that taxpayers are given a fair opportunity to explain discrepancies. This judgment reinforces the principle that tax demands should be based on substantive compliance rather than technical lapses, particularly when no revenue loss is involved.
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