Anticipatory Bail For GST Practitioner: Distinguishing Professional Assistance From Fraudulent Intent

This ruling (delivered in February 2026) provides significant protection for tax practitioners and intermediaries who assist in GST compliance. The Patna High Court clarified that providing professional services, such as filing returns based on information provided by a client, does not inherently satisfy the requirements for criminal charges like cheating or breach of trust.

The Legal Conflict: Professional Negligence vs. Criminal Conspiracy

The Core Issue:

Can a tax consultant be held criminally liable for “Cheating” (Section 420 IPC/BNS) or “Criminal Breach of Trust” if their client’s business is later found to be involved in a fraudulent Input Tax Credit (ITC) racket?

Statutory Framework:

Section 132 (GST Act): Deals with the punishment for various GST offences, including the fraudulent availment of ITC.
Anticipatory Bail: Sought under the provisions of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, to prevent arrest during the investigation.

Facts of the Case

The Engagement: In 2021, the informant (owner of Veena Traders) engaged the petitioner to obtain a GST registration in his wife’s name to secure a loan via another entity, Sushil Hardware.
The Compliance: The petitioner assisted in filing Nil GST returns. The informant claimed that OTPs were shared with the petitioner for this purpose.
The Allegation: GST officials later detected that while “Nil” returns were filed, the GSTIN was used to pass on fraudulent ITC despite no actual purchases being recorded. The informant alleged the petitioner had “cheated” him.
The Defense: The petitioner argued that he acted strictly as a professional, filing returns based on the instructions and data (or lack thereof) provided by the client.

The Decision: Anticipatory Bail Allowed

The High Court ruled in favour of the petitioner, granting protection from arrest based on the following observations:

Bona Fide Conduct: The Court found no evidence of mala fide (bad faith) intent. A practitioner filing returns based on shared OTPs and client-provided data is performing a professional service, not necessarily orchestrating a fraud.
Absence of Criminal Offence: On the face of the record (the FIR and case diary), the Court noted that the essential ingredients of “Cheating” or “Breach of Trust” were not established against the petitioner.
Conditional Liberty: To balance the interests of the State, the Court granted bail but imposed a unique condition: the petitioner must file an affidavit undertaking not to involve himself in any tax or GST practice during the pendency of the case.
Statutory Compliance: The bail was subject to standard conditions, including cooperation with the investigation and not tampering with evidence.

Key Takeaways for Tax Professionals

Document Your Instructions: Always maintain a written record (emails, letters, or logs) of the data provided by the client. If a client asks for a “Nil” return, ensure you have a record of that specific instruction.
The “OTP” Risk: Sharing and using OTPs is a standard part of digital compliance, but it can be used against a practitioner if fraud is discovered. This case shows that while OTP usage is not a crime per se, it puts the practitioner in the spotlight.
Professional Indemnity: This ruling highlights that the judiciary distinguishes between a “Mastermind” of a fraud and a “Professional Facilitator.” However, the condition to stop practicing shows that the reputational and professional risks remain high.

Summary of Defensive Measures for Practitioners

KYC of Clients: Perform basic background checks on clients before taking up their GST work.
Engagement Letters: Clearly define the scope of work and state that the accuracy of data is the client’s responsibility.
Avoid Sub-standard Practices: If a client’s business model appears suspicious (e.g., passing ITC without movement), it is safer to disengage than to risk criminal prosecution.

HIGH COURT OF PATNA

Gautam Kumar

State of Bihar^*

Sandeep Kumar, J.

CRIMINAL MISCELLANEOUS No. 69696 of 2025

FEBRUARY 27, 2026

Sriram Krishna and Amarjeet, Advs. for the Petitioner. Yogendra Kumar, Ms. Swati Mishra, Umakant Tiwari, Advs. and Yogendra Mishra, Sr. Adv. for the Respondent.

ORDER

1. Heard the learned counsel for the petitioner, the learned APP for the State, and the learned senior counsel for the informant.

2. The petitioner apprehends arrest in connection with Jalley P.S. Case No. 129 of 2024 registered for offences under Sections 406 and 420 of the Indian Penal Code.

3. As per the prosecution case, Pawan Kumar Mahato ran Veena Traders (building materials) and hired Gautam Kumar in 2021 to get a GST certificate for his wife Rekha Devi’s loan application under a government scheme (via Sushil Hardware). He continued filing zero GST returns with Gautam’s help, sharing OTPs despite issues. On 02.05.2024, GST officials raided, revealing fraudulent ITC claims of Rs.26,33,051.84 passed to six firms from Veena Traders/Sushil Hardware despite zero purchases in FY 2023-24. Gautam used his details and Gmail for the scam.

4. Learned counsel for the petitioner submits that petitioner is quite innocent and has not committed any offence. He further submits that he was authorized by the informant to file the GST returns and on instruction, he has filed the GST returns. For the penalty imposed upon the firm of the informant, the informant has legal remedy and in fact the informant had availed that legal remedy of appeal which has been dismissed. He further submits that against the appellate order, the informant can approach this Court in writ jurisdiction in view of the fact that there is no tribunal functional.

5. Learned APP for the State and Mr. Mishra, the learned Senior Counsel for the O.P. No.2 have vehemently opposed the prayer for bail.

6. I have considered the submissions of the parties and have gone through the records of the case. The action of the petitioner appears to be bona-fide and not mala-fide and in my opinion, no offence is made out and therefore, the application is allowed.

7. Accordingly, let the petitioner, above-named, in the event of arrest or surrender within four weeks from today in the Court below, be released on anticipatory bail on furnishing bail bonds of Rs.10,000/- (Rupees ten thousand) with two sureties of the like amount each to the satisfaction of learned Court below where the case is pending/successor Court in connection with Jalley P.S. Case No. 129 of 2024 subject to the conditions as laid down under Section 482(2) of the BNSS.

8. The petitioner, at the time of furnishing bail bonds, shall file an affidavit stating that he will not involve himself in tax or GST practice.