Case: Haarine Associates vs. The Assistant Commissioner (ST)(FAC)

Facts:?

• Period of Assessment: The petitioner, Haarine Associates, filed GST returns for the assessment period 2017-2018. The returns reflected turnover from 01.07.2017 (when GST came into force) to 31.03.2018.?

• Mismatch Issue: A discrepancy arose between the turnover figures reported in the petitioner’s GST returns and the figures in Form 26AS. This mismatch was due to the inclusion of turnover from 01.04.2017 to 30.06.2017 in Form 26AS, which was before GST was implemented.?

• Show Cause Notice: A show-cause notice was issued to Haarine Associates on 07.08.2023, and subsequently, an order was passed on 28.12.2023 imposing tax liability based on the mismatch.?

• Natural Justice Concern: The petitioner argued that the tax liability was imposed without a proper hearing, breaching the principles of natural justice. They contended that the mismatch was due to the inclusion of the pre-GST period in Form 26AS, which should have been considered.?

Issue:?

• Was the tax liability imposed on Haarine Associates without properly considering the explanation for the mismatch between Form 26AS and GST returns??

• Did the tax authorities breach the principles of natural justice by not providing a proper hearing to the petitioner??

Ruling:?

• Reconsideration Ordered: The Madras High Court set aside the impugned order dated 28.12.2023, ruling that the petitioner was not given an adequate opportunity to explain the discrepancy, thereby violating principles of natural justice.?

• Conditional Remand: The court directed the tax authorities to reconsider the case, provided that the petitioner remits 10% of the disputed tax demand within two weeks.?
• Opportunity for Hearing: The court ordered that the petitioner be given a reasonable opportunity for a personal hearing. The tax authorities were instructed to issue a fresh order within three months of receiving the petitioner’s reply.?

• Lifting of Bank Attachment: The court also ordered the lifting of the bank attachment that was imposed based on the original assessment order.?

Key Takeaways for Business:?

1. GST authorities now cross-checking Form 26AS to ensure that the turnover figures matches with GST returns.?

2. Similarly, income tax authorities may also review GST returns during assessments, so maintaining consistency across both GST and income tax filings is crucial.?

Conclusion:?

This ruling emphasizes the importance of adhering to the principles of natural justice, especially in cases involving complex tax assessments. It underscores the need for tax authorities to consider all relevant factors and provide taxpayers with a fair opportunity to explain discrepancies.?

As Form 26AS is an auto-generated document, it raises a critical question: Should tax authorities rely solely on this form 26AS for calculating turnover.

Written By : Krish Nagpal

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