GST Tribunal Sets Aside Orders Over ₹34.71 Lakh Diary-Sales Claim, Remands Case For Entry-Wise Review

Following an SIB inspection on 7 August 2018, three diaries were seized from the taxpayer’s business premises. The adjudicating authority treated entries aggregating to ₹34,71,068 as suppressed outward supplies and imposed tax and an equivalent penalty of ₹5,83,608.24 each.

On the taxpayer’s appeal, the First Appellate Authority reduced the alleged suppressed turnover to ₹95,734 and sustained tax and an equivalent penalty of ₹17,232 each.

The Revenue appealed, challenging, among other things, the acceptance of 85 B2B invoices produced at the appellate stage and the treatment of diary entries concerning hand pumps. The taxpayer maintained that the invoices and transactions were disclosed in its returns and that the diary entries had been reconciled with its books.

The Tribunal cited no specific statutory provision or precedent. It applied the general principles that a finding of suppressed turnover must rest on identification and examination of the relevant transactions and supporting evidence, including reconciliation with books and statutory returns; an aggregate figure alone is insufficient without a demonstrable factual basis.

A quasi-judicial order must disclose the material considered, the reasoning adopted and the basis for its conclusions; where seized-document entries are relied upon, the authority must identify and explain those entries and address the taxpayer’s evidence and explanation.

The Tribunal also directed verification of the relevant invoices and their disclosure and tax reporting in GSTR-1 and GSTR-3B, as applicable.

The adjudication order did not adequately identify the diary entries used to calculate ₹34,71,068, explain the alleged sale of 76 hand pumps, or address the taxpayer’s explanations concerning rough calculations and expenses.

The First Appellate Authority likewise failed to identify the entries supporting the reduced figure of ₹95,734, explain its computation, or clearly state why the explanation concerning 36 hand pumps was accepted while other entries were treated differently.

The Tribunal held that neither the late production of invoices nor their claimed disclosure in returns could be treated as conclusive without verification; the diary entries, invoices, books and returns required transaction-specific examination. Because these deficiencies went to the root of the turnover determination, neither the original nor reduced demand could simply be affirmed.

On remand, the authority must conduct an entry-wise examination of the diaries, verify the hand-pump transactions, invoices, books and returns, quantify only turnover established as taxable and undisclosed, provide an effective hearing, and issue a reasoned order.

The Tribunal made no conclusive finding that suppressed turnover was established or that the taxpayer’s explanation must be accepted.