Landmark High Court Ruling on ITC Non-Reflection in GSTR-2A/2B A significant judgment has been delivered in the case of Surender Gupta vs. Union of India, addressing a common issue faced by taxpayers—tax demands arising due to non-reflection of Input Tax Credit (ITC) in GSTR-2A/2B, despite the GST being duly paid to the supplier. In this case, the petitioner had paid ₹17.49 lakhs as GST to the New Okhla Industrial Development Authority (NOIDA) on a one-time lease premium. However, due to an error on NOIDA's part, the amount was not correctly reflected in GSTR-2A, leading to tax demands and penalties from the GST department. The Hon’ble High Court held that the petitioner should not be penalized for NOIDA’s mistake, and directed NOIDA to compensate him ₹19.22 lakhs within 15 days. The court further emphasized that the burden of procedural lapses by the supplier cannot be passed on to a bona fide recipient. 📌 This ruling offers much-needed relief and sets a strong precedent for similar cases. Citation: Surender Gupta vs. Union of India & Ors. – Writ Tax No. 651 of 2023 – Allahabad High Court (Noida Bench), Order dated 26.03.2024
𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁 𝘂𝗽𝗵𝗼𝗹𝗱𝘀 𝗜𝗧𝗖 𝗳𝗼𝗿 𝗕𝗼𝗻𝗮𝗳𝗶𝗱𝗲 𝗯𝘂𝘆𝗲𝗿𝘀 — 𝗺𝗮𝗷𝗼𝗿 𝗿𝗲𝗹𝗶𝗲𝗳 𝘁𝗼 𝗴𝗲𝗻𝘂𝗶𝗻𝗲 𝗱𝗲𝗮𝗹𝗲𝗿𝘀 𝗤𝘂𝗲𝘀𝘁𝗶𝗼𝗻 𝗯𝗲𝗳𝗼𝗿𝗲 𝘁𝗵𝗲 𝗖𝗼𝘂𝗿𝘁 : Is ITC still allowed to a registered buyer who paid tax to a registered seller, even if the seller failed to deposit that tax with the Government ? 𝗙𝗮𝗰𝘁𝘀: At the time of the transaction, the sellers were registered with the Department. Later, their registrations were cancelled, and they defaulted on depositing the tax. The High Court held that purchasers who paid tax in good faith to registered sellers are entitled to ITC, subject to invoice verification. 𝗞𝗲𝘆 𝗢𝗯𝘀𝗲𝗿𝘃𝗮𝘁𝗶𝗼𝗻𝘀 (𝗥𝗲𝗹𝘆𝗶𝗻𝗴 𝗼𝗻 𝗤𝘂𝗲𝘀𝘁 𝗠𝗲𝗿𝗰𝗵𝗮𝗻𝗱𝗶𝘀𝗶𝗻𝗴 𝗛𝗶𝗴𝗵 𝗖𝗼𝘂𝗿𝘁 𝗿𝘂𝗹𝗶𝗻𝗴): 🔹 The Department cannot deny ITC under Section 9(2)(g) of DVAT to a bona fide purchaser buying from a registered seller issuing a valid tax invoice with TIN. 🔹 If the selling dealer fails to deposit the tax, the Department’s remedy is to recover it from the defaulting seller, not to deny ITC to the purchasing dealer. 🔹 If there is evidence of collusion between the purchaser and seller, the Department may proceed under Section 40A of the DVAT Act. 𝗚𝗦𝗧 𝗣𝗲𝗿𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲: Under Section 16(2)(c) of the CGST Act, ITC entitlement is connected to the supplier’s payment of tax. 𝗠𝗮𝗻𝘆 𝘁𝗮𝘅𝗽𝗮𝘆𝗲𝗿𝘀 𝗮𝗿𝗲 𝗳𝗮𝗰𝗶𝗻𝗴 𝗻𝗼𝘁𝗶𝗰𝗲𝘀 𝘂𝗻𝗱𝗲𝗿 𝗚𝗦𝗧 𝘄𝗵𝗲𝗿𝗲: 🔸 The supplier became non-existent after the transaction, 🔸 The supplier failed to deposit tax despite filing GST returns, 🔸 Notices were issued long after the supplier’s registration was cancelled, 🔸 The supplier’s GST registration was cancelled retrospectively, 🔸 Multiple notices are issued on the same transaction without verification of the actual supplier default, 🔸 AI-generated notices raise allegations without giving the recipient a chance to explain or verify the underlying transactions. In these cases, bona fide buyers are being penalized for the defaults of their suppliers, with the Department approaching recipients directly instead of addressing the actual defaulter. Applying the principles of this Supreme Court ruling can provide much-needed relief and clarity to genuine taxpayers. 𝗖𝗶𝘁𝗮𝘁𝗶𝗼𝗻: 𝗦𝘂𝗽𝗿𝗲𝗺𝗲 𝗖𝗼𝘂𝗿𝘁 | 𝗦𝗵𝗮𝗻𝘁𝗶 𝗞𝗶𝗿𝗮𝗻 𝗜𝗻𝗱𝗶𝗮 (𝗣) 𝗟𝘁𝗱 | 𝟬𝟵-𝗢𝗰𝘁-𝟮𝟬𝟮𝟱 #KMSIndia#GST#InputTaxCredit#SupremeCourt
Received a Tax Notice under Section 148A/ 148? Check 'WHO' issued it. Hold on before you panic - check WHO issued it. Was it issued by 'jurisdictional tax officer' from your local ward? or by a 'faceless officer' under the National Faceless Assessment regime? Why does this matter? because after April 1, 2021, Section 148 notices are supposed to be issued via the faceless mechanism under the new reassessment regime (as per the Finance Act, 2021 and CBDT instructions). But here’s the twist: Indian High Courts across have taken different views. The matter is now pending before the Supreme Court, which will settle the issue definitively. Until then - these notices are legally challengeable, depending on the facts and the jurisdiction. So if you’ve received a 148 notice recently: a. Check who issued it b. Review if procedural safeguards were followed c. Act within statutory timelines (you often have just 7–30 days!) Seek professional guidance — this isn’t just routine paperwork Because in tax law, “Who sent it” can sometimes decide “whether it even stands” #Section148#TaxNotice#FacelessAssessment#IncomeTax#CBDT#HighCourtJudgments#TaxpayerAwareness#Reassessment#TaxLitigation#IndiaTax#FinanceLeadership
Earlier today, the Shah Alam High Court allowed Toh Puan Naimah Khalid’s leave application to commence judicial review application to challenge the RM 313 million tax assessment issued by the Revenue. The Attorney General’s objection was dismissed by the High Court. The High Court also granted a stay order against the payment of income tax in favour of the taxpayer. Tax disputes generally don’t get much media coverage but this case is an exception, where for various reasons, the media closely follows the progress. I must also say that this is not a straightforward tax dispute as a number of novel points are being raised for the first time in Malaysia. Due credit to RDS Partnership tax partners D P Naban & Amira Azhar for their input in developing the legal arguments and my younger colleagues especially Dharshini Sharma for her legal research. In addition to arguing that domestic remedy doesn’t bar taxpayer’s right to pursue judicial review, we also raised the following arguments to establish that the application is not frivolous and vexatious: (a) The Revenue failed to appreciate that Ss 78, 79, 80 and 81 of the ITA 1967 are not blanket provisions to enable it to collate information on the income of the taxpayers accrued outside Malaysia. These provisions must be read in conjunction with Section 3 of the ITA to harmoniously embody the spirit of the ITA. The Revenue has no basis to use these provisions to request for information on matters which beyond its taxing jurisdiction. (b) As the taxpayer has not received any income in Malaysia from the foreign assets in question, there is no basis in law for the Revenue to require the taxpayer to report on these assets or disclose any related information. This is especially when the Revenue is unable to show that the taxpayer had indeed received income in Malaysia from those assets. (c) There are no provisions in the ITA empowering the Revenue to demand documents on financial ability to acquire them. (d) The Revenue had acted in excess of its jurisdiction by arbitrarily deeming that the foreign assets were acquired in 2018 and arbitrarily treating the 2018 market value as the acquisition price when the assets were acquired by the taxpayer in the 1990s. (e) The Revenue failed to take into account that pursuant to S 45(4) of the ITA, in cases of joint election, upon raising an assessment against the taxpayer’s spouse, the taxpayer has no chargeable income by operation of law. (f) The Revenue cannot demand documents in relation to foreign assets which were purchased by the taxpayer more than 30 years ago. Section 82A of the ITA only requires taxpayers to retain documents for up to 7 years. It is well-settled law that every exercise of statutory power cannot be arbitrarily exercised. If exercise of power under a statute exceeds the four corners of that statute, it would be ultra vires and a court of law must be able to hold it as such.
Imagine waking up to find your Input Tax Credit… Gone from your ledger. You did everything right: ✅ Paid the supplier ✅ Received the goods ✅ Maintained full documentation — Invoices, e-way bills, GRNs, bank trail But one day your GST portal flashes this: Blocked under Rule 86A. No notice. No hearing. Just: We have reasons to believe… 1️⃣ What is Rule 86A? Rule 86A of the CGST Rules, 2017 empowers a GST officer (Assistant Commissioner or higher) to block ITC in your Electronic Credit Ledger if they believe the credit is fraudulently availed or ineligible. But here's the catch: This is a discretionary power, not an absolute one. And yet, it’s being used like a sledgehammer even against compliant taxpayers. 2️⃣ Real Case. Real Impact. XYZ Pvt. Ltd. had ₹50 lakh ITC blocked. They had every document in order. But their supplier hadn’t paid GST on time. The officer invoked Rule 86A(1)(b) and blocked their ledger. Working capital was wiped out. Operations crippled. ✅ Relief finally came through Rule 86A(2) but not before heavy cash outflows and litigation. 3️⃣ Game-Changing Supreme Court Verdict (2025) Kings Security Services v. State of Punjab (SC, July 2025) The Supreme Court laid down a landmark judgment: ❌ Blocking negative balance in the electronic credit ledger under Rule 86A is NOT legally valid. ✅ Blocking must apply only to actual, available ITC, not theoretical or future credits. This overrules conflicting High Court views and sets a national standard. 4️⃣ What Triggers Rule 86A? 📍Fake or deregistered supplier 📍Goods/services never received 📍Supplier hasn’t paid tax 📍No valid documentation 📍Buyer is non-existent But even when NONE of these apply, ITC is often blocked wrongly. 5️⃣ The Deeper Problem 🔻 Buyers punished for supplier defaults 🔻 “Reasons to believe” often not recorded 🔻 ITC blocked automatically as a revenue safeguard 🔻 Future or negative balances blocked, now declared ILLEGAL 6️⃣ What Professionals Must Do Now If you're a CA, CS, CMA, or Tax Lawyer / Counsel, act proactively: ✔️ Do vendor due diligence (GSTIN, returns, registration) ✔️ Keep all documentation: invoice, e-way bill, proof of delivery, payment trail ✔️ Match GSTR-2B monthly ✔️ File representation under Rule 86A(2) ✔️ Quote Kings Security SC verdict if negative balances are blocked ✔️ Ensure the 1-year expiry under Rule 86A(3) is enforced 7️⃣ What the Courts Are Saying Various HCs: Don't penalize the buyer for supplier's lapse, 'Reasons to believe' must be on record, No written reasoning = ITC block is void, Supreme Court (2025) – Negative balance? Can’t be touched Rule 86A isn’t just a rule. It’s a battleground. Will your clients just survive it or navigate it like pros? Comment below. Disclaimer: This post is only for educating the readers. #Rule86A#GSTLitigation#KingsSecurity#SupremeCourt#GSTIndia#ITCBlocked#CGSTRules#ComplianceStrategy#CA#CS#CMA#GSTProfessionals#TaxTech#CareerflowAI#GSTNews#LinkedInLegal#GSTIndia
🚨 Critical update on FIRC based ITC refunds under GST 🚨 In a significant ruling, the Hon'ble Gujarat High Court dealt with a matter focusing on the need of FIRCs in case of refund of unutilized Input Tax Credit (ITC) on account of export of services. The authorities had initially rejected the claim, citing the need for FIRCs as per a CBIC circular. However, the petitioner presented a Chartered Accountant's (CA) certificate to demonstrate receipt of foreign currency for export services, supported by an approval from the Reserve Bank of India for a netting-off mechanism for foreign currency transactions. The court referenced a Supreme Court ruling affirming that CA certificates are valid documents as they highlighted that the petitioner had indeed received foreign currency in compliance with RBI guidelines, making the rejection of the refund claim solely due to the absence of FIRC unjustified. This ruling brings an essential relief for taxpayers as we have seen various instances wherein the taxpayers, for various practical/ legal reasons, are unable to furnish FIRCs and alternatively produce documents such as Credit Advice issued banks. #GST#InputTaxCredit#ITC#Refund#FIRC#Export#HighCourt#Judgment
In-Depth Analysis of Relief Measures Introduced in Budget 2024-25 to Limit Reopening of Old Income Tax Returns In the Budget 2024-25, the Union Finance Minister unveiled a series of relief measures aimed at restricting the reopening of old income tax returns beyond specified time limits. These proposed changes aim to enhance clarity, stability in tax administration processes, and provide relief to taxpayers by reducing tax uncertainties and disputes. Key Details: ✅ Proposed Reforms: The Finance Minister proposed significant reforms to the Income Tax Act, 1961, including measures to restrict the reopening of old income tax returns (ITRs) beyond specified time limits. These changes are designed to simplify the provisions for reopening and reassessment. ✅ Time Limits for Reopening: The proposed time limit for reopening assessments has been set to beyond three years from the end of the assessment year. However, assessments can only be reopened if the escaped income is Rs 50 lakh or more, up to a maximum period of five years from the end of the assessment year. ✅ Search Cases: In search cases, the proposed time limit is six years before the year of search, as opposed to the existing time limit of ten years. This change aims to reduce tax uncertainty and disputes in such cases. ✅ Notice Issuance: The budget memorandum clarified that no notice under Sections 148A shall be issued if three years have passed from the end of the relevant assessment year. Exceptions to this rule include cases where the escaped income is Rs 50 lakh or more, where the time limit can be extended to five years. ✅ Illustrative Example: For instance, if the escaped income in the financial year 2023-24 is below Rs 50 lakh and the ITR was filed in AY 2024-25, the tax authorities cannot reopen or reassess the case after 31.03.2028. If the escaped income exceeds Rs 50 lakh, the reopening or reassessment cannot happen beyond five years after the end of the assessment year, allowing for enhanced taxpayer certainty. The proposed relief measures in Budget 2024-25 aim to simplify tax procedures, provide stability in tax administration, and reduce disputes between taxpayers and tax authorities. By limiting the timeframes for reopening old income tax returns, the government seeks to alleviate the burden on taxpayers and create a more transparent and predictable tax environment. ▶️ Share your thoughts in the comments below ▶️ Repost if you like Follow Manjushree Sudheendra for more #incometax#finance#economics
Recipient not liable if the supplier fails to remit tax - Kerala HC - an open issue: Recently, in case of Diya Agencies, Hon'ble Kerala HC held the following : 1. The difference in 3B 2A cannot be the only basis for confirming the demand of ITC. 2. The tax payer must be given opportunity to prove the genuineness of the transaction. The Court makes reference to Ecom Gill case. Author's note : In Ecom Gill case, Hon'ble SC nowhere says that the supplier should have paid the tax. It only says the recipient should prove genuineness of the transaction. 3. Hon'ble Kerala HC made the following important observation, "If the seller dealer (supplier) has not remitted the said amount paid by the petitioner to him, the petitioner cannot be held responsible." I think, this is the first case in GST where any HC has explicitly said that the recipient is not liable if the supplier has not paid tax. But interestingly, in operative part of the order, Hon'ble HC has said, " After examination of the evidence placed by the petitioner/assessee, the assessing authority will pass a fresh order in accordance with law." Thus, suppose, in case of some transactions, if the supplier has not paid the tax, and the recipient petitioner proves genuineness, then an issue which is still open is - what will prevail - sec 16 (2) (c) because the HC has ordered to issue order in accordance with law Or - HC's observation that the petitioner cannot be held liable if the supplier has not paid the tax? Views welcome : Adv. Kuldeep Kulkarni Thanks to Jatin Harjai for reporting the case.
Attached is the latest filing in a high-profile #ERC case. There is a lot to unpack, but here are a couple of points worth highlighting: "[the IRS' unwillingness to provide an individualized review before denial] reflects a violation of IRS’s obligation to provide a meaningful administrative pathway before requiring taxpayers to engage in litigation. The Taxpayer Bill of Rights (I.R.C. § 7803(a)(3)) (“TBOR”) statutorily guarantees the rights to pay no more than the correct amount of tax, to challenge IRS positions, to a fair and just tax system, and to a prompt administrative appeal in an independent forum... The TBOR guarantees the “right to appeal a decision of the Internal Revenue Service in an independent forum[.]” ...Defendants abridge those rights by delaying the post-disallowance process to a point where IRS cannot complete administrative appeals within the time set by Congress. IRS violates due process by acting with deliberate disregard for taxpayer appellate rights in that context." ~and~ "IRS had ample opportunity to review individual taxpayer claims during its processing moratorium that spanned nearly one calendar year. It told the Court that the moratorium was designed for that purpose. Id. ¶87. Despite those promises, the IRS devised a system that instead exploited IRS’s information deficit to the detriment of taxpayer rights. In sum, these administrative actions collectively offend notions of fair play and decency. Defendants have acted with a deliberate indifference toward taxpayer constitutional rights...." Curious to hear what stands out to others who have read the latest pleading. Mary Lundstedt, Esq.Taxplaining🎙️#taxpayerbillofrights#ERClitigation#wethepeople