Burden of proof for genuineness of transaction while claiming ITC is on Registered Person  – Karnataka VAT Tribunal

Friends sharing with you an important Judgment of Karnataka VAT regarding Disallowing of ‘Input Tax Credit‘ #ITC on purchase turnover where the Department challenged the genuineness of purchases of goods.

Relevant Sections of Karnataka VAT’2003:

  • S.39(1): Reassessment
  • S.70: Burden of Proof
  • S.63(1): Appeal to Appellate Tribunal
  • ARR

Facts of the Case:

Reassessments were concluded for Apr’10 to Mar’11 by disallowing the claim of the input tax credit.

Apart from creating additional demand of tax the Authority has also levied, penalty and imposed interest.

Feeling aggrieved by the said orders, the appellant filed appeals before the Tribunal.

Assessee contented that the copies of the invoices produced by the appellant are genuine and the authorities have failed to disapprove the same. No enquiry with regard to the genuineness of the invoices issued by the above dealers.

Assessee said that the burden lies on the Department to disapprove the claim made by the appellant. It is sufficient for the appellant to file a list of such purchases and produce the copy of invoices.

The assessee further said that merely because selling dealers have not declared the sales turnover and have not paid the tax, the appellant should not be penalised.

Department said that appellant is unable to produce evidences like:

  • purchase invoices
  • e-sugams (equivalent to e-way Bill in GST)
  • Lorry receipts of having acknowledged the receipt of goods of the selling dealers as the books of accounts are seized.

Therefore, ITC claim rejected

Tribunal Held:

Burden of Proof lies on Assessee if he wishes to claim ITC, not on the Department.

As the Appellant is unable to prove the genuineness of the transaction, ITC cannot be allowed.

Title: Surana Industries Ltd vs State of Karnataka

Citation: Sales Tax Appeal No. 2680 to 2687 of 2012

Authority: Karnataka Appellate Tribunal, Bangalore

Dated: 27-Sep-2017

Compiled by: Abhishek Raja Ram

Learning from this decision:

The onus to prove genuineness of the transaction lies on the Person claiming ITC. If the claim is not substantiated with any document or if any document is found missing then Department has the right to disallow ITC.

As the Department is rejecting ITC claims due to Bogus or Fake ITC, it is recommended to keep all necessary documentary evidence ready while availing ITC. There should be monthly reconciliation of ITC with documents so that if something is missing that can be collected timely.

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Company: Abhishek Raja and Associates
Location: Delhi, Delhi, India
Member Since: 18 Aug 2018 | Total Posts: 27
Abhishek Raja Ram - Popularly known as "Revolutionary Raja" is FCA, DISA, Certificate Courses on – Valuation, Indirect Taxes , GST etc, M. Com (F&T) Mr. Abhishek Raja “Ram” is a Fellow member of ICAI, qualified in 2006, and holds Master’s-Degree in Commerce. He has more than a 15 ye View Full Profile

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