Rightbrain Technologies Private Limited vs. State Of Karnataka

Facts

The petitioner, Rightbrain Technologies Private Limited, is challenging two adjudication orders and consequential demand/recovery orders. The first order, dated 23.08.2024, pertains to the tax period April 2019 to March 2020, issued by the Assistant Commissioner of Commercial Taxes (Respondent No. 2). The second order, dated 09.12.2025, relates to the tax period April 2022 to March 2023, issued by the Deputy Commissioner of Commercial Taxes (Audit)-4.1 (Respondent No. 3). The petitioner's counsel argued that the non-compliance was due to the cessation of its full-time director, Sri Satyanarayana Murthy Yenamandra, who handled tax compliances until 24.05.2023, and the petitioner had not made alternative arrangements by the time the notices were issued. The proceedings were initiated due to a mismatch between Input Tax Credit (ITC) availed in GSTR-3B and ITC reflected in GSTR-2A.

Held

The Court held that the petitioner should be granted an opportunity to respond to the Show Cause Notices. While acknowledging that there could be debate on the delay in making alternative arrangements (over 20 months), the Court found the petitioner's plea of bona fides persuasive. The Court reasoned that the petitioner asserted its ability to produce reconciliation and documents to demonstrate the genuineness of transactions upon which returns were filed. Therefore, to ensure adjudication without undue protraction, the petitioner must be given a chance to present its case. The adjudication orders and demand/recovery orders (Annexures A, B, and C) were quashed with the direction that the petitioner respond to the Show Cause Notices dated 27.03.2024 and 28.07.2025, subject to specific conditions. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether the petitioner should be granted an opportunity to respond to the Show Cause Notices dated 27.03.2024 and 28.07.2025, considering the circumstances of its former director's cessation and the alleged lack of alternative arrangements for tax compliance, as per principles of natural justice? Petitioner's arguments: The petitioner contended that the adjudication orders were passed without providing an adequate opportunity to respond to the show cause notices. They asserted that the tax compliances were managed by a director who ceased his association with the company on 24.05.2023. At the time the notices were issued, the petitioner had not yet made alternative arrangements. They further argued that if given an opportunity, they could furnish documents to reconcile the Input Tax Credit (ITC) mismatch between GSTR-3B and GSTR-2A, proving the genuineness of their transactions. Revenue's arguments: The judgment records that the learned Standing Counsel for the respondents was heard in light of the petitioner's submissions to decide on whether an opportunity should be extended.