ITC Claimed On Alleged Fake Supplies; Delhi High Court Upholds Dept's Action In Provisionally Attaching Bank Account

The Delhi High Court has upheld the Commissioner's action of provisionally attaching the petitioner's bank account, to the extent of Rs. 26.91 lakhs being the amount of input tax (ITC) claimed in respect of allegedly fake supplies.

The bench of Justice Vibhu Bakhru and Justice Sachin Datta has observed that the exercise of power by the Commissioner was not unwarranted. The Commissioner had found it necessary to provisionally attach the petitioner's bank account to protect the interest of the department.

The petitioner/assessee challenged an order passed by the Principal Additional Director General, Directorate General of GST Intelligence, Gurugram Zonal Unit, by which the objections preferred by the petitioner to the order provisionally attaching the bank account under Section 83 of the Central Goods and Services Tax Act, 2017, were rejected.

The petitioner/assessee has not produced the order attaching his bank account. The copy of it has not been provided to the petitioner; there are no communications on record that indicate that the petitioner had sought a copy of it from the concerned officer. The petitioner submitted that he was informed by his banker (ICICI Bank, Dwarka, New Delhi) that its bank account No. 046105000960 had been provisionally attached by the Commissioner.

The order indicated that the Commissioner had taken the action pursuant to investigations, which revealed that the petitioner had filed an input tax credit (ITC) amounting to Rs. 26,91,938 from two suppliers—M/s Gupta Enterprises and M/s Sunrise Ventures—who were found to be fake.

It is alleged that M/s Gupta Enterprises is the sole proprietorship of one Vikram and was stated to be carrying on his business at his principal place of business. However, during physical verification, the concern was found to be nonexistent. On further inquiries, it was revealed that Mr. Vikram was a taxi driver by profession.

It was alleged that the said Vikram had made a statement that he does not carry on any business in the name of Gupta Enterprises, and it was created by Shyam Dev Gupta. Shyam Dev Gupta had created the tax entity and had issued “goods less invoices.”.

Similarly, it was found that M/s Sunrise Ventures was the proprietorship concern of one Shesh Nath Prasad, who was a national-level player of Taekwondo and worked as a fitness coach. It is alleged that his identity was also used by Shyam Dev Gupta to set up the fake tax entity.

The Commissioner has considered it appropriate to provisionally attach the petitioner's bank account, to the extent of Rs. 26.91 lakhs being the amount of ITC claimed in respect of allegedly fake supplies.

The court, while dismissing the petition, held that material available with the Commissioner has a live nexus with his opinion; the order cannot be faulted.

Counsel For Petitioner: Jitin Singhal

Counsel For Respondent: Harpreet Singh

Case Title: JV Creatives Pvt. Ltd. Versus Principal Additional Director General, DGGI, Gurugram Zonal Unit, Gurugram And Anr

Citation: 2024 LiveLaw (Del) 859

Case No.: W.P.(C) 10042/2024, CM APPL. 41048/2024, CM APPL. 41163/2024

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