M/S Run Service Infocare Private Limited vs. The Union Of INDIA

Held

The Court found no statutory sanction for the assessment of 40% of the total turnover being taken as the taxable transaction within the State of Bihar. The Court observed that the assessment order dated 20.08.2024 was flawed in its methodology. Consequently, the Court set aside both the assessment order (Annexure P/6) and the rectification order (Annexure P/10). The Court directed the petitioner to appear before the Assessing Officer on December 20, 2024, with all substantiating documents. The Assessing Officer is to afford an opportunity for hearing and finalize the assessment on that date or an adjourned date. The ratio decidendi is that an assessment must be based on a legally permissible methodology and supported by adequate evidence, and arbitrary calculations without statutory basis are unsustainable. The Court did not expressly leave any issue undecided.

Facts

The petitioner, M/s Run Service Infocare Private Limited, is challenging an order rejecting its rectification application. An assessment order was passed against the petitioner for the Assessment Year 2019-20. The petitioner, which operates across 19 states, contends that the Assessing Officer incorrectly included turnover from outside Bihar for assessment and arbitrarily applied 40% of the total turnover as the taxable turnover within Bihar, despite the annual return specifically showing the gross turnover within Bihar. The revenue argued that the petitioner failed to provide necessary documents relating to turnover in other states, such as GSTR-9, GSTIN, Debit Notes, Trial Balance, or Books of Account, to support its claim for rectification. The revenue also stated that these documents were produced only after the assessment order and along with the rectification application, which is meant for correcting apparent errors, not for raising new contentions.

Key Issues

1. Whether the Assessing Officer erred in calculating the taxable turnover within the State of Bihar by reckoning the petitioner's entire turnover, including transactions outside Bihar, and applying an arbitrary 40% thereof, contrary to the specific gross turnover declared in the annual return for Bihar? (Section 73 of the Bihar Goods and Services Tax Act, 2017). Petitioner's arguments: The petitioner argues that the assessment should be based on the actual gross turnover within Bihar as declared in the annual return, and not on an arbitrary calculation of 40% of the total turnover across all states. They contend that the assessment order lacks statutory sanction for such a calculation. Revenue's arguments: The revenue contends that the petitioner failed to provide essential documents (GSTR-9, GSTIN, Debit Notes, Trial Balance, Books of Account) pertaining to transactions in other states to substantiate their claim for rectification. They argue that the documents were produced belatedly, only with the rectification application, which is not the appropriate forum for raising new contentions beyond apparent errors.