The Gauhati High Court has refused to quash a GST show-cause notice over an alleged GSTR-2A input tax credit (ITC) mismatch, leaving the taxpayer’s factual and legal defence for the proper officer to assess. The ruling does not decide whether the company is ultimately entitled to the disputed credit.
What the Gauhati High Court decided
In M/s Surya Business Private Limited v. State of Assam and Others, WA/321/2026, the Division Bench dismissed the company’s appeal and affirmed the single judge’s refusal to interfere with a notice issued under Section 73(1) of the Assam Goods and Services Tax Act. The judgment, delivered on 22 September 2026, is reported as neutral citation 2026:GAU-AS:13966-DB.
The court held that the company could present its defence—including evidence about its purchases and legal arguments on ITC—to the proper officer in the statutory adjudication. It did not determine the company’s final ITC eligibility or establish a general rule that a GSTR-2A mismatch either always or never justifies a demand.
How the dispute arose
Audit observation for FY 2018–19
Surya Business Private Limited, which does business in Jorhat, was audited under Section 65 for financial year 2018–19. An audit observation dated 13 December 2023 alleged excess ITC of approximately ₹27.25 lakh. The stated discrepancy concerned invoices for inward supplies from registered supplier M/s Atikur Rahman that did not appear in the company’s GSTR-2A.
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The company’s response and the notice
The company responded to the audit observation on 17 December 2023. It asserted that it held valid tax invoices, had received the goods, and had paid the supply value, including tax, through banking channels. It also argued that GSTR-2A was a facilitation mechanism and should not, on its own, determine ITC eligibility, citing Union of India v. Bharti Airtel Ltd., CBIC communications and other decisions.
An audit report in Form GST ADT-02 followed on 8 January 2024. On 11 January 2024, the department issued a Section 73(1) show-cause notice proposing recovery of the disputed ITC, along with interest and penalty. The company’s statements about invoices, receipt and payment were its submissions; the court did not treat them as established findings proving that every statutory condition for credit had been met.
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Why the notice-stage challenge failed
The company challenged the notice in a writ petition. An interim order dated 5 February 2024 restrained further proceedings while that case was pending. On 10 August 2026, the single judge declined to quash the notice, allowed the company to file a reply within 30 days, and said it could raise its contentions before the proper officer. The Division Bench affirmed that order in its entirety; the 30-day opportunity was specific to this case.
The appellate court treated the notice as the beginning of a process to determine liability, not as a final adjudication. It said that questions such as whether the company actually paid GST to its supplier and whether the supplier filed the relevant returns could be considered by the proper officer. The court also declined to regard the company’s asserted documents, the absence of a counter-affidavit, or its argument that proceedings should first have been taken against the supplier as reasons that made the notice itself jurisdictionally invalid.
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What the judgment leaves open
The ruling is about where and when the company’s defence should be assessed. It does not hold that GSTR-2A is conclusive evidence against a taxpayer, or that a mismatch alone resolves the statutory question of ITC entitlement. Nor does it find that possession of invoices and proof of bank payments automatically establish eligibility.
The proper officer must consider the company’s evidence and applicable legal authorities in the adjudication. The possibility that the company may ultimately succeed on its claim did not, by itself, require the High Court to stop the proceeding at the notice stage.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Practical significance for taxpayers
For a taxpayer served with a similar notice, the decision distinguishes a challenge to the initiation of proceedings from the merits of the credit claim. In this case, the court left the merits to statutory adjudication rather than deciding them in the writ appeal.
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Quick Recap
- Keep the claims distinct: Invoices, receipt of goods and payment through banking channels were assertions made by Surya Business, not final findings by the High Court.
- Address the relevant evidence: The judgment identifies supplier payment and return filing, alongside the taxpayer’s factual defence, as matters the proper officer could consider.
- Do not assume the case sets a universal outcome: The decision does not determine every GSTR-2A mismatch dispute or prescribe the result of this company’s adjudication.
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