Credit Notes Ignored: Assessment Order Set Aside and Matter Remanded

Case Title: Sait Nagjee Purushotham and Company Pvt. Ltd. v. Commercial Tax Officer & Ors.
Court: High Court of Karnataka, Bengaluru
Petition Number: Writ Petition No. 11130 of 2025 (T-RES)
Date of Judgement: 29 April 2025
Category of Dispute: Input Tax Credit (ITC) – Mismatch in GSTR-2A and consideration of credit notes
Relevant Sections: Articles 226 & 227 of the Constitution of India; Sections 16, 42, 73, 74 of the CGST Act, 2017; Relevant CGST Rules

Facts of the Case

1. The petitioner challenged the assessment order dated 26.12.2024 (Annexures A1 & A2) passed by the respondent (Commercial Tax Officer, Mysore) (Para 2).

2. The Show Cause Notice dated 26.11.2024 alleged discrepancies in inward supply reflected in GSTR-2A and ITC claim (Para 3).

3. The petitioner filed a detailed reply on 24.12.2024 enclosing credit notes and supporting documents, contending that the ITC difference arose due to such credit notes (Para 3).

4. The assessing officer passed the impugned order on 26.12.2024 without considering the reply, credit notes, and evidence produced by the petitioner (Para 3 & 8).

Questions in Consideration

1. Whether the respondent was justified in passing the assessment order without considering the reply and documents filed by the petitioner, particularly the credit notes? (Para 3 & 8)

2. Whether such non-consideration amounts to violation of principles of natural justice, warranting remand? (Para 7)

Observation of the Court

1. The Court noted that in similar circumstances, the Madras High Court in Oasys Cybernetics Pvt. Ltd. v. State Tax Officer (W.P. No. 9624/2024, dated 12.04.2024) held that ignoring credit notes and explanations in ITC disputes invalidates the assessment order (Para 6–7).

2. In the present case, it was evident that the petitioner’s credit notes and detailed submissions were not considered by the officer (Para 8).

3. Non-consideration of vital evidence, such as credit notes, amounts to arbitrary assessment and requires remand for fresh consideration (Para 7–8).

Judgement of the Court

1. The writ petition was allowed (Para 9(i)).

2. The impugned orders dated 26.12.2024 were set aside (Para 9(ii)).

3. The matter was remanded back to the assessing officer for fresh consideration in accordance with law (Para 9(iii)).

4. The petitioner undertook to appear before the officer on 19.05.2025, with liberty to file additional documents (Para 9(iv)).

Between Fine Lines

• The Court reiterated that credit notes must be duly considered before finalizing ITC-related assessments.

• Orders passed without examining replies and documents are not sustainable.

• The case highlights the importance of adhering to principles of natural justice in GST adjudication.

• Assessment orders ignoring material evidence are liable to be set aside.

• Fresh consideration with proper hearing is mandatory before confirming tax liability.

Summary of Referred Cases

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”