Certificate from Chartered Accountant is required to be considered by the department before while disallowing the claim of ITC

The Madras High Court has ruled that tax authorities must consider certificates from Chartered Accountants when assessing Input Tax Credit (ITC) claims. In a case involving Ingram Micro India, the court found that the Assessing Authority failed to properly consider the evidence, including a CA certificate detailing state-specific trade payables, before disallowing ITC. The court quashed the original order and remanded the case for reconsideration, emphasising the importance of due diligence.

The Hon'ble Madras High Court in the case of Ingram Micro India (P.) Ltd. v. State Tax Officer[Writ Petition No. 594 of 2024 dated January 12, 2024] held that the Assessing Authority did not apply their mind before drawing conclusions and failed to consider the certificate issued by a Chartered Accountant and all documents submitted by the Assessee. Hence, the Impugned Order was remanded for reconsideration. 

Facts

Ingram Micro India (P.) Ltd. ("the Petitioner") had claimed Input Tax Credit ("ITC") under Section 16 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") in respect of the assessment year 2017-2018. A Show Cause Notice ("SCN") was issued to the Petitioner with regard to non-payment to the suppliers for a period exceeding 180 days. The Petitioner provided all supporting documents, including the Chartered Accountant's certificate dated December 20, 2023. However, the Revenue Department ("the Respondent") issued an Order dated December 21, 2023 ("the Impugned Order") on the basis of the total trade payables of the Petitioner amounting to INR 2704.1 Crores.

The Respondent contended that the total trade payables of the Petitioner were taken into consideration because the Petitioner did not provide a proper breakdown of net trade payables relating to the State of Tamil Nadu.

Hence, aggrieved by the Impugned Order, the present writ petition was filed by the Petitioner.

Issue

Whether a Certificate from Chartered Accountant is required to be considered by the department while disallowing the claim of ITC? 

Held

The Hon'ble Madras High Court Writ Petition No. 594 of 2024, held as under:

• Observed that, all relevant documents were provided by the Petitioner in the reply. 
• Noted that, the contentions of the Respondent stating that the entire trade payables of the Company across India should be taken as the trade payables because the Petitioner did not provide Tamil Nadu financial statements are wrong. Under the Companies Act 2013, every company is required to file financial statements regarding all of its operations, and there is no provision for filing state-specific financial statements. However, the Petitioner had submitted a certificate from a Chartered Accountant stating that the trade payables attributable to the State of Tamil Nadu are Rs. 1816.48 million. Learned counsel for the Petitioner also submits that the Petitioner would provide all the invoices issued by the suppliers with regard to the aggregate sum of Rs. 1816.48 million.
• Held that, the Respondent did not apply its mind before drawing the conclusions. Consequently, the matter was remanded for reconsideration by the Respondent. Hence, the Impugned Order was quashed, and writ petition was allowed.