In a landmark ruling, the Madras High Court has quashed assessment orders that rejected input tax credit (ITC) claims solely on the grounds that the taxpayer had not claimed ITC in GST-3B returns. This ruling is set to bring significant relief to taxpayers, as it paves the way for similar cases where ITC claims have been rejected solely based on GSTR-3B returns without considering other supporting documents and returns. 

The case involved M/s. Sri Shanmuga Hardware Electricals is a proprietorship firm engaged in trading electrical products and hardware. The firm had filed nil returns in GSTR-3B but later claimed ITC based on GSTR-2A and GSTR-9 returns for the assessment years 2017-18, 2018-19, and 2019-20. However, the tax authorities rejected the ITC claims solely because they were not reflected in the GSTR-3B returns. 

Quashing the assessment orders, Justice Senthilkumar Ramamoorthy underscored the importance of the assessing officer's role. When a registered person asserts ITC eligibility, the officer should meticulously examine whether the claim is valid by scrutinizing all relevant documents, including calling upon the taxpayer to provide such documents. The court held that when a registered person asserts IT

Commenting on the ruling, leading tax expert DOST Vikash Dhanania said, "This judgment reinforces the principle that tax authorities cannot reject ITC claims solely based on GSTR-3B returns. This ruling will provide relief to taxpayers who have inadvertently made errors in GSTR-3B filings but have valid ITC claims supported by other returns and documents."

The court remanded the matters for reconsideration, directing the petitioner to place all documents pertaining to its ITC claims before the assessing officer within two weeks. The respondent was directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and issue fresh assessment orders within two months. 

This ruling will undoubtedly serve as a beacon of hope for taxpayers who have been struggling to claim their rightful ITC claims. It is also a step towards ensuring that tax authorities exercise due diligence when examining ITC claims.

Regards
GST DOST

Source: Writ Petition Nos. 3804, 3808 & 3813 of 2024 and W.M.P.Nos. 4105, 4107, 4110, 4111, 4116 & 4119 of 2024