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2022 (1) TMI 444 - HC - VAT and Sales TaxValidity of re-assessment order - denial of input tax credit claimed on the basis of tax invoices issued by such selling dealers, who did not furnish tax compliance - burden of prove - fake/bogus transaction - HELD THAT - The burden of proof certainly lies on the appellant assessee to prove the transaction whether is genuine or not. Merely for the reason that the selling dealers have not filed the return and failed to discharge the tax liability by remitting the tax collected, could not be a ground to disallow the input tax credit claimed by the assessee unless such transaction is found to be not genuine and is a fictitious document/invoice created to claim input tax credit i.e., a bogus transaction. In the absence of such analysis made by the authorities, merely for the reasons as aforesaid, input tax credit could not be denied. It is also pertinent to mention that the first appellate authority ought to have examined the details of selling dealers in the background of not filing the return or the tax payment collected being made by such selling dealers. It is needless to observe that if such selling dealers are not existing dealers or deregistered dealers, there is absolutely no bar to deny the input tax credit claimed by the assessee, but such reason has to be clearly recorded for extending the benefit of input tax credit which was denied by the assessing authority - In the absence of such reasons forthcoming in the order of the authorities and in the light of the material now placed by the Revenue before this Court, which remains a finding of fact, it is deemed appropriate to set aside the orders of the revisional authority and first appellate authority and restore the matter to the file of the first appellate authority to reconsider the matter. Appeal allowed by way of remand.
Issues:
Challenge to reassessment order under Section 66(1) of the Karnataka Value Added Tax Act, 2003 based on denial of input tax credit. Jurisdiction of revisional authority under Section 64(1) of the Act to set aside first appellate authority's order. Burden of proof on the appellant to establish genuineness of transactions. Examination of details of selling dealers to determine eligibility for input tax credit. Analysis: The appellant, a registered dealer under the Karnataka Value Added Tax Act, challenged a reassessment order denying input tax credit based on non-compliance by selling dealers. The first appellate authority partially allowed the appeal, but the revisional authority set aside this decision, questioning the genuineness of transactions. The appellant argued that the first appellate authority correctly allowed credit only for genuine transactions, and the revisional authority exceeded its jurisdiction. The Revenue contended that the first appellate authority's decision was erroneous, justifying the revisional authority's intervention. The burden of proof rests on the appellant to establish transaction genuineness. Mere non-filing of returns by selling dealers does not automatically justify denying input tax credit unless transactions are proven fictitious. The first appellate authority should have scrutinized selling dealers' details regarding return filings and tax payments. Lack of clear reasons for denying credit to non-existing or deregistered dealers necessitates setting aside the orders and remanding the matter to the first appellate authority for reconsideration in light of legal precedents. The judgment emphasized the importance of thorough analysis and clear reasoning in denying input tax credit, especially in cases involving non-compliant selling dealers. The decision highlighted the need for proper documentation and justification for disallowing credit, ensuring a fair and lawful assessment process. The judgment also referenced specific legal cases to guide the first appellate authority in making a well-founded decision. Ultimately, the appeal was allowed to the extent indicated, leaving all rights and contentions open for further proceedings.
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