The Appellate Authority – GST, Andhra Pradesh in its recent order in the case of Sri Kali Krishna Industries Vs Assessing Authority AP has held that mere mismatch in GSTR 3B & GSTR 1 is not conclusive for any suppression of tax and that the contentions submitted by the taxpayer need to be examined by adjudicating authority before issuing an order.
Facts of the Case:
- The Assessing Authority has caused scrutiny of GST returns of the appellant for the tax period from July 2017 to June 2018. On such scrutiny, it noticed that the appellant’s declared turnover in GSTR-3B does not equal to the GSTR-1 declared sale turnover.
- The assessing authority has determined the under-declared tax of Rs. 38,648/- under CGST and APGST Acts, 2017, and passed orders dated 4-1-2019.
Contention of the Appellant:
- The appellant M/s. Sri Kali Krishna Industries contended that due to unknown problems in GSTN network software, though it had attempted to file GSTR-3B return for October 2017, it was automatically conceived ‘NIL’ return and it could not file any return for this month afterward since no pending return shown in GSTN login.
- The appellant submitted that, after 10/2017, they have migrated to the composition scheme and duly discharged the actual tax liability for the month of 10/2017. The assessing authority has determined tax liability without causing verification of these records.
- It was further contended by the appellant that they have discharged the net tax liability before issuing any show-cause notice by the Department. But, without appraising these facts, the AA has unilaterally determined under-declared tax merely basing on a mismatch between GSTR-1 and GSTR-3B.
- The appellant prayed that the respectable Appellate Joint Commissioner (ST), Vijayawada may be pleased to consider the above facts and legal position may be pleased to allow the appeal by annulling the impugned orders passed by the Assistant Commissioner (ST).
- The appellant finally pleaded that since they have discharged the liable tax for October 2017, the supposed under-declared tax arrived through mismatch reports, is not factual and requested to set aside such levy by annulling the assessment order and prayed for appeal orders in their favour.
Issue before the Appellate Authority:
Whether the appellant contends that they have discharged the actual net tax liability for October 2017, hence the suppression of tax arrived through mismatch report is not factual and correct, has been substantiated with a logical explanation and dependable evidence or not?
Order of Appellate Authority: Deliberation and Ruling
- The primary explanation of the appellant is that due to certain software error though they have attempted for filing a return for October 2017, but the system has conceived NIL return, as such they could not file the return for that month.
- As per the computation of actual accounts, the gross tax liability for October 2017 was admitted by the appellant for Rs. 38,647/- the same as determined by the Assessment Authority. However, the appellant explained that after adjusting the eligible ITC of Rs. 25,080/-, they have paid the remaining tax liability of Rs. 13,568/- on 28-12-2017. This fact could not be verified by the assessing authority, because the AA has not correctly scrutinized the appellant contentions and one-sidedly construed the under-declared tax even though the appellant has established that they have duly discharged the net tax payable for October 2017.
- These facts & evidence adduced by the appellant concerning balance liable tax suggest that the determination of under-declaration by AA is lacking certainty and authenticity.
- On the other hand, the appellant has strongly proffered and corroborated that after adjusting the eligible ITC, they have duly paid the net tax liability for October 2017.
- It is pertinent here to observe that mismatch reports is indicative in nature, but cannot be seen as final to conceive any suppression of turnover/tax.
- The AA ought to have examined the appellant contentions submitted in response to the show-cause notice, which the AA failed to do so.
In view of above deliberations the Authority adjudged that the determined under-declared tax liability by AA cannot be upheld as bonafide. Therefore, the tax levied based on mismatch reports is annulled & the appellant contentions are found sustainable concerning rational arguments and corroborative evidence.
Accordingly, the appeal on this aspect is allowed and the tax so levied is annulled. In the end, the assessment is annulled on the levy made by the Assessing Authority.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
