Assessment Order Deemed Withdrawn: Condonation of Delay in Belated GSTR-3B Returns

Assessment Order Deemed Withdrawn: Condonation of Delay in Belated GSTR-3B Returns

1. The Core Dispute: “Best Judgment” vs. Belated Compliance

The case involves a registered taxpayer who failed to file GSTR-3B returns for seven months. Following the statutory procedure, the department issued notices under Section 46 and subsequently passed “Best Judgment” assessment orders under Section 62.

• The Conflict: The assessee eventually filed the pending GSTR-3B returns, but did so after the then-prescribed 120-day window from the date of the assessment orders.

• The Legislative Shift: On October 1, 2023, an amendment to Section 62(2) was implemented, extending the period for deemed withdrawal of assessment orders from 30 days to 60 days, with a further extension of another 60 days (total 120 days) upon payment of additional late fees.

• Authority’s Stand: The Revenue argued that since the amendment came into force on 01.10.2023, the assessee (who defaulted prior to this date) could not claim the benefit of the extended 120-day period. Consequently, they initiated recovery through Garnishee notices and bank account attachments.

2. Legal Analysis: Retrospective Benefit of Procedural Amendments

The High Court focused on whether the beneficial amendment to Section 62(2) should be applied to cases where the compliance occurred around the time of the law change.

I. Reliance on Madras High Court Precedent

The Court followed the reasoning in Silk Junction v. Dy. STO (2024), where the Madras High Court held that the spirit of the amendment was to encourage statutory compliance rather than purely penalize taxpayers.

• The court observed that if the tax, interest, and late fees are paid, the primary objective of the revenue is satisfied.

• Strict adherence to the 120-day limit was deemed inappropriate when the taxpayer had substantially complied with their obligations.

II. Deemed Withdrawal of Orders

Under Section 62(2), once a valid return is furnished (even if belatedly condoned by the court), the “Best Judgment” assessment order is deemed to have been withdrawn.

• This is a legal fiction that nullifies the assessment order as if it never existed for the purpose of recovery.

• Any consequential actions—such as tax demands, penalties, or Garnishee proceedings—lose their legal basis once the parent order is withdrawn.

3. Final Ruling and Relief

The Andhra Pradesh High Court allowed the writ petition, granting the following reliefs:

• Deemed Withdrawal: All assessment orders passed under Section 62 for the period Jan-July 2023 are deemed withdrawn.

• Revocation of Coercive Steps: Garnishee notices issued for recovery and the attachment of bank accounts were ordered to be revoked immediately.

• Statutory Compliance: The Court clarified that while the assessment orders are withdrawn, the assessee remains liable for interest under Section 50 and late fees under Section 47 for the delayed filing.

Key Takeaways for Non-Filers

1. Automatic Withdrawal: If you file your returns within 120 days of the assessment order and pay all dues, the order is automatically withdrawn by law.

2. Condonation Beyond 120 Days: Courts are increasingly viewing the 120-day window as directory rather than mandatory, especially if the tax has been paid in full.

3. Bank Attachment: Once a return is filed and the order is deemed withdrawn, any bank attachment becomes illegal. Taxpayers should immediately intimate the Proper Officer of the filing to stop recovery actions.