Input Tax Credit cannot be denied on the basis of clerical mistake being made unintentionally which created mismatch between GSTR-3B & GSTR-2A.

Case Title: Orient Traders v. Deputy Commissioner of Commercial Taxes (Audit)-3, 4, DGSTO-3

Court Name: High Court of Karnataka

Petition No.: Writ Petition No. 2911 of 2022 (T-RES)

Relevant Section: Section 16 of the CGST Act, 2017 / Karnataka GST Act, 2017

Category of Dispute: Input Tax Credit (ITC)

Date of Judgement: 16 December 2022

Facts of the Case

• The petitioner, Orient Traders, filed returns under the GST regime, during which an inadvertent and bona fide error occurred — figures were entered under the wrong table in GSTR-3B, leading to a mismatch with GSTR-2A. [Para 8]
• The Department issued a notice denying ITC solely based on this mismatch, without questioning the legitimacy of the credit or the underlying transactions. [Para 8]
• The error occurred during the initial year of GST implementation, a time when Form GSTR-2A had not yet been operationalised. [Para 8]
• The authorities were aware of the correct figures via ICEGATE data but chose to ignore them. [Para 8]

Question(s) in Consideration

• Whether ITC can be denied due to a mismatch between GSTR-3B and GSTR-2A when the mismatch arises from an inadvertent, bona fide error in return filing? [Para 8]
• Whether the assessee should be allowed to amend GSTR-3B or be permitted to manually rectify the error? [Para 12, 13]

Observation of the Court

• The Court observed that the error was entirely unintentional and bona fide, stemming from a wrong entry in the return, and did not pertain to the admissibility of ITC. [Para 8]
• It was noted that the relevant period was the first year of the GST regime and GSTR-2A was not implemented, which justified leniency. [Para 8]
• The Department’s selective reliance on ICEGATE for some periods while ignoring it for the disputed period was criticized. [Para 8]
• The Court emphasized that correcting such an error would not result in any revenue loss to the government. [Para 12]

Judgement of the Court

• The Hon’ble High Court allowed the writ petition in favour of Orient Traders. [Para 13]
• The Department was directed to reopen the portal to allow the petitioner to correct the GSTR-3B for the relevant period. [Para 13]
• If technical issues prevent portal-based correction, manual/physical correction should be permitted. [Para 13]

Between Fine Lines

The Karnataka High Court held that ITC cannot be denied merely due to form mismatch when the mismatch stems from a bona fide error during the nascent stages of GST. The court favoured a correction mechanism over a rigid denial. This case underscores the judiciary’s pragmatic approach, especially when the mismatch is clerical and revenue-neutral.

Summary of Referred Cases

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