ITC Mismatch and Condonation of Delay: A Victory for "Bona Fide" Taxpayers

ITC Mismatch and Condonation of Delay: A Victory for “Bona Fide” Taxpayers

The High Court of Karnataka (2026) has delivered a significant ruling favoring a taxpayer who missed the statutory appeal deadline due to a supplier’s error and a lack of legal awareness. The decision emphasizes a “justice-oriented approach” over technicalities.

The Core Conflict: Supplier Fault vs. Taxpayer Penalty

The petitioner faced a common GST nightmare:

The Purchase: The petitioner bought goods, paid the tax to the supplier, and claimed Input Tax Credit (ITC) based on a valid invoice.
The Supplier’s Lapse: The supplier failed to upload the invoice in their Form GSTR-1.
The Mismatch: This caused a mismatch in the petitioner’s GSTR-2A/2B, leading the Department to deny the ITC and issue a demand under Section 73.
The Delay: The petitioner spent time chasing the supplier for rectification and, lacking professional legal support, missed the 3-month (plus 1-month extension) deadline to file an appeal under Section 107.

The Decision: Why the Court Condoned the Delay

While the Appellate Authority dismissed the appeal as time-barred, the High Court set that order aside based on the following principles:

Bona Fide Belief: The petitioner was actively trying to resolve the issue with the supplier. Their wait for the supplier to “fix the system” was considered a genuine reason for the delay.
Justice over Technicality: The Court held that a “justice-oriented approach” is required when a taxpayer shows a reasonable cause, such as a lack of legal awareness or professional assistance.
Application of Beneficial Circulars: The Court directed the authorities to consider the merits of the case in light of two crucial GST Circulars:
- Circular No. 183/15/2022: Provides a mechanism to verify ITC for FY 2017-18 and 2018-19 where GSTR-2A mismatches occur.
- Circular No. 193/05/2023: Extends similar relief for the period April 1, 2019, to December 31, 2021.

The Impact: Merits over Limitation

The High Court treated the appeal as being filed within the time limit and remanded the matter to the Appellate Authority. The authority must now decide the case based on the actual evidence of the transaction (invoices, payment proofs) rather than simply denying credit because of the supplier’s filing error.

Key Takeaways for Taxpayers

Situation	Action/Protection
Supplier Mismatch	If the supplier missed uploading an invoice for 2017-21, use Circular 183/193 to prove the transaction via Chartered Accountant (CA) or self-certification.
Missed Appeal Deadline	If the delay is “bona fide” (genuine), you can approach the High Court under Writ Jurisdiction to seek condonation, even if the Appellate Authority has no power to extend it beyond 4 months.
Legal Awareness	Courts are increasingly sympathetic to Small and Medium Enterprises (SMEs) that lack sophisticated tax departments, provided the intent is not to evade tax.

Strategic Note

If you are facing a similar mismatch, ensure you have a Certificate from the Supplier’s Chartered Accountant (if the mismatch exceeds ₹5 Lakhs) or a Self-Certification from the supplier (if below ₹5 Lakhs), as prescribed by the circulars mentioned in this judgment.

HIGH COURT OF KARNATAKA

Vishal Durgadas Jaiwant

Joint Commissioner of Commercial Taxes (Appeals)^*

Mrs. K.S. HEMALEKHA, J.

WRIT PETITION NO. 100561 OF 2026 (T-RES)

JANUARY 30, 2026

S.G. Solargoppa, Adv. for the Petitioner. Praveen K. Uppar, AGA for the Respondent.

ORDER

1. Learned Addl. Government Advocate accepts notice for the respondents.

2. The petitioner challenging the order under Section 73 of the CGST and SGST Act, 2017 passed by the Commercial Tax Officer-respondent No.2, preferred an appeal before the appellate authority-respondent No.1 under Section 107 of the CGST Act, 2017, which came to be dismissed as barred by limitation. Aggrieved by which, the petitioner is before this Court.

3. Learned counsel for the petitioner submits that the delay in preferring the appeal was neither wilful nor deliberate. An affidavit explains for the reasons for delay was filed along with appeal. However, the appellate authority failed to consider the same. It is contended that the petitioner has claimed Input Tax Capital on basis of genuine tax invoice and was under bona fide believe that the discrepancy would be by rectified by the supplier, which resulted in the delay.

4. Learned counsel referring to the decision in Kolapudi Enoch Washington v. Additional Commissioner (GST & Central Tax) GSTL 177/96 GST 91 (Karnataka)/2022 KHC 37970 and Nagson and Co. v. Joint Commissioner Of Central Tax (Appeals-II) 2022 KHC 38176 and also the benefit extended under Circular bearing No.183/15/2022-GST dated 27.12.2022, as considered in the case of Wipro Ltd. v. Asstt. Commissioner of Central Taxes GST 319/72 GSTL 325 (Karnataka)/W.P.No.16175 of 2022 dated 06.01.2023.

5. Learned Additional Government Advocate appearing for the respondents-State submits that as limitation is concerned, Section 107 of the CGST Act, 2017 prescribe a mandatory and with a further condonable period of only 30 days and since the appeal was filed beyond the said period, the appellate authority was justified in dismissing the appeal as time barred.

6. Having given an anxious consideration to the submissions and the material on record, the reasons for delay, as set out by the petitioner while filing an appeal under Section 107(1) of the CGST Act, 2017 at paragraph No.5, is as under:

•

I had claimed Input Tax Credit (ITC) based on a genuine tax invoice dated 06.02.2020 issued by M/s. Mahavir Soft Image (India) Ltd.

•

Subsequently, it came to my knowledge that the said supplier failed to upload the invoice in GSTR-1, which led to a mismatch and consequent rejection of ITC.

•

I issued legal notice to the supplier on 25.11.2021, urging compliance, but received no response.

•

I was under the genuine and reasonable belief that the issue could be resolved at the supplier’s end and thus inadvertently delayed in filing the appeal.

•

Additionally, due to limited awareness procedural requirements, and absence of professional legal support at that time, I could not act within the prescribed time.

7. The above reasons disclose that the petitioner had acted under bona fide believe that the mismatch in the Input Tax Credit would be rectified by the supplier, that a legal notice was issued to the supplier, and that the delay was occasioned due to lack of professional assistance and limited awareness of procedural requirements. The explanation, in the present facts, cannot be said to be lacking bona fides.

8. No doubt Section 107(1) of the CGST Act, 2017 prescribes the period within an appeal to be filed. However, adopting a justice oriented approach, particularly when the justification offered is reasonable and when the matter deserves consideration on merits, in the peculiar facts and circumstance of this case the delay in preferring the appeal deserves to be condoned and the matter requires consideration on merits by the appellate authority having regard to the circler issued by the GST council, namely No.183/15/2022-GST dated 27.12.2022 and Circular bearing No. No.193/05/2023-GST dated 17.07.2023.

9. Accordingly, this Court pass the following:

ORDER

The writ petition is allowed.

ii.

The order in appeal in 27.06.2025 passed by the Joint Commissioner of Commercial Taxes-respondent No.1 is hereby set aside.

iii.

The appeal filed by the petitioner under Section 107 of the CGST Act 2017 shall be treated as filed within time.

iv.

Respondent No.1 shall consider the appeal on its merits and pass appropriate orders in accordance with law, in terms of the Circular bearing No.183/15/2022-GST dated 27.12.2022 and Circular bearing No. No.193/05/2023-GST dated 17.07.2023.