GST Demand cannot be raised based on Profit and Loss Account figures

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GST Demand cannot be raised based on Profit and Loss Account figures

In a significant ruling, the Madras High Court addressed the question whether GST demand can be raised solely based on figures from the Profit and Loss Account. 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], Hon’ble Madras High Court 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.

The 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.The Petitioner, who was dissatisfied with the Impugned Order, filed a writ petition before the Hon’ble Madras High Court, claiming that the Impugned Order violates the principles of natural justice because the demand was made purely on the basis of the Profit and Loss account account.

The Hon’ble Madras High Court held as under:

  • Held that, based on the profit and loss account of the petitioner, the total revenue and expenditure of the corporate entity were made the basis for imposing GST.
  • 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 assessment Order is quashed and the matter is remitted back for reconsideration after depositing 5 percent of the disputed tax demand.

 

GST Demand cannot be raised based on Profit and Loss Account figures

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