M/S Ajagondanahalli Homes LLP vs. The State Of Karnataka
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The petitioner challenged an ex parte Adjudication Order based on audit findings concerning ITC reversal (Section 17(2), Rule 42), excess ITC claims (GSTR-3B vs GSTR-2A), and non-payment of tax on construction services for development rights. The petitioner contended that tax payments made via Form GST DRC-03 were not accounted for and the valuation was arbitrary. The subsequent appeal was dismissed solely on the ground of delay.
Held
The High Court quashed both the ex parte Adjudication Order and the Order in Appeal, observing that the petitioner must have an opportunity to explain the audit observations. The Court granted liberty to the petitioner to file a reply to the Show Cause Notice for a fresh adjudication on merits.
Key Issues
The key issues were whether an ex parte adjudication order should be sustained when the petitioner claims non-participation due to other proceedings and unconsidered tax payments, and whether an appeal dismissed solely for delay in such circumstances warranted intervention.
Sections Cited
Section 17(2), Rule 42
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Cause title — parties, addresses and appearances
ORAL ORDER
The petitioner's grievance is with the Adjudication Order dated 16.01.2025 [Annexure-B] and the Order in Appeal dated 12.05.2026 [Annexure- A]. The Adjudication Order is an ex parte Order, and it is based on the audit findings which read as under: ABSTRACT OF TAX DETERMINED PARAS OMISSION SGST+CGST INTEREST
Audit observation on reversal of availed and utilized input tax credit on unsold portion of completed projects as on date of issue of occupancy certificate in compliance with section 17 (2) and amended Rule 42 of SGST/ CGST Act 2017
99680
Excess claim of ITC in GSTR 3B in comparison with GSTR 2A
238457
Nonpayment of tax on supply of construction services to the owner of the land in lieu of supply of the development rights by the owner. 2099917 503980
The petitioner has not responded to the Intimation or the Show Cause Notice, but the petitioner contends in this petition that the HC-KAR NC: 2026:KHC:32571 Adjudicating Officer has failed to account for the tax payments made through Form GST DRC-03 and that the valuation is based on an arbitrary valuation benchmark which has no basis in law or on facts. Ms. Aishwarya S Hanchate, the learned counsel for the petitioner, submits that the petitioner could not participate in the proceedings because another Officer had commenced proceedings for the same tax period which has ultimately culminated in such proceedings being dropped.
Sri K Hemakumar, a learned Additional Government Advocate, who accepts notice for the respondents is heard. This Court in the peculiarities stated, opines that the petitioner must have an opportunity to explain the difference between the Forms in GSTR-3B and GSTR-2A as also the other two observations as above for complete adjudication, especially when the appeal is dismissed on the HC-KAR NC: 2026:KHC:32571 ground of delay. As such, observing that all questions are left open, the following. ORDER [A] The petition is allowed. [B] The Adjudication Order dated 16.01.2025 [Annexure-B] and the Order in Appeal dated 12.05.2026 [Annexure-A] are quashed with liberty to the petitioner to file Reply to the Show Cause Notice by 24.08.2026. (B M SHYAM PRASAD) JUDGE AN/-
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.