GST demand cannot be raised based on figures in Profit and Loss Account

Last updated: 23 March 2024

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Quick Summary

The Madras High Court has ruled that tax authorities cannot raise a Goods and Services Tax (GST) demand based solely on the figures presented in a company's Profit and Loss account. The court found that the assessment order in this case was issued without proper application of mind, violating principles of natural justice. Consequently, the order was quashed and remitted for reconsideration.

Court :
Madras High Court

Brief :
The Hon'ble Madras High Court in the case of M/s. Ralco Synergy Pvt. Ltd. v. Joint Commissioner of State Tax and Ors. [W.P. No. 5554 of 2024 dated March 5, 2024] set aside the Impugned Order passed by the Revenue Department, thereby holding that, GST demand cannot be raised based on figures in Profit and Loss Account.

Citation :
W.P. No. 5554 of 2024 dated March 5, 2024

The Hon'ble Madras High Court in the case of M/s. Ralco Synergy Pvt. Ltd. v. Joint Commissioner of State Tax and Ors. [W.P. No. 5554 of 2024 dated March 5, 2024] set aside the Impugned Order passed by the Revenue Department, thereby holding that, GST demand cannot be raised based on figures in Profit and Loss Account.

Facts

M/s. Ralco Synergy Pvt. Ltd. ("the Petitioner") was issued intimation vide Form DRC-01A, after the inspection was conducted by the Revenue Department ("the Respondent"). Thereafter, Show Cause Notice ("SCN") was issued, and the Assessment Order dated December 23, 2023 ("the Impugned Order"), was passed by the Respondent against the Petitioner.

Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon'ble Madras High Court, contending that the Impugned Order is violative of the principles of natural justice as the demand has been raised solely based on the figures of the Profit and Loss Account.

Issue

Whether GST demand can be raised based on figures in Profit and Loss Account?

Held

The Hon'ble Madras High Court in the case of WP No. 5554 of 2024 held as under:

Noted that, the Respondent Assessing Officer relied upon total expenditure and revenue of the corporate entity on all India basis.
Further Noted that, the profit and loss account of the Petitioner was the basis for issuance of the Impugned Order.
Opined that, the Impugned Order has been issued without any application of mind.
Held that, the Impugned Order is quashed and the matter is remitted back for reconsideration after depositing 5 percent of the disputed tax demand.

FAQ :

No, the Madras High Court has ruled that GST demand cannot be raised based solely on the figures found in a company's Profit and Loss account.

The GST demand was raised based on the total expenditure and revenue figures from the company's Profit and Loss account.

The High Court quashed the assessment order, stating it was issued without proper application of mind and violated natural justice principles.

The matter has been sent back for reconsideration, with the condition that the company must deposit 5 percent of the disputed tax demand.

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Judgement posted by

Bimal Jain

Service

FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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