Madras High Court Grants Fresh Opportunity in GST ITC Mismatch Case

The Madras High Court has allowed a writ petition challenging an assessment order passed under Section 74 of the Tamil Nadu Goods and Services Tax Act, 2017.

The petitioner is Tvl. Punitha Antony Store, which has assailed the assessment order dated 19 January 2026, contending that the demand had been passed ex parte owing to its inability to participate in the proceedings. The respondent had alleged excess availment of input tax credit amounting to Rs 3.27 lakh under CGST and SGST for the assessment year 2025-26 on account of a mismatch between GSTR-3B and GSTR-2A.

Before the High Court, the petitioner has submitted that the mismatch was because of errors committed by certain suppliers, who had mistakenly reported outward supplies as B2C transactions instead of B2B transactions. Consequently, the corresponding ITC failed to reflect properly in GSTR-2A despite the purchases being genuine.

After taking note of the nature of the dispute, the explanation offered on merits, and the reasons assigned for nonparticipation, the High Court held that the assessee ought to be afforded an opportunity to place the relevant documents before the assessing authority. The Court observed that such opportunities have been granted on equitable grounds in appropriate cases. Accordingly, the Court directed the petitioner to deposit 25% of the disputed tax amount within four weeks from the receipt of the web copy of the order. Upon such deposit, the impugned assessment order dated 19 January 2026 shall stand set aside, and the matter shall stand remanded to the respondent for fresh adjudication.

The court has also directed the assessee to appear before the AO and submit its reply and supporting documents, whereupon the respondent shall pass orders afresh in accordance with law. Accordingly, the writ petition was allowed, and the connected miscellaneous petition was closed without any order as to costs.