GST Assessment and Rectification Orders Quashed Since Immovable Property Sale Falls Completely Outside GST Purview

GST Assessment and Rectification Orders Quashed Since Immovable Property Sale Falls Completely Outside GST Purview

GST Assessment

Issue

Whether the GST Department can levy tax under Section 73 on financial receipts reflected in Form 26AS by treating them as taxable supplies, where the taxpayer asserts that the transactions represent the sale of land, which is an immovable property explicitly excluded from the scope of GST.

Facts

• Tax Period: The case pertains to the Financial Year (FY) 2021-22.

• The Transaction: The petitioner had purchased a parcel of land and subsequently sold the exact same land during the relevant assessment period.

• Form 26AS Tracking: The financial transactions triggered a Tax Deducted at Source (TDS) under the Income-tax Act, which reflected as a TDS credit in favor of the petitioner in their Form 26AS.

• GST Proceedings: Taking note of the income receipts in Form 26AS, the GST department issued a Show Cause Notice (SCN) proposing to tax these amounts. The petitioner submitted a reply to the notice.

• Assessment & Non-Production: The Assessing Officer (AO) passed a final assessment order under Section 73, treating the entire Form 26AS receipts as taxable GST turnover. The AO justified this by recording that the petitioner had failed to produce the physical sale deeds during the assessment stage.

• Rectification Attempt: The petitioner moved a rectification application under Section 161 to correct this error, but the subsequent rectification order failed to grant the necessary relief.

• Writ Petition: The petitioner filed a writ petition before the High Court challenging both the original Section 73 assessment order and the Section 161 rectification order, producing the original land sale deeds and corresponding Form 26AS entries before the court.

Decision

• Outside the Purview of GST: The High Court observed as a foundational principle of law that the sale of land and immovable property is completely excluded from the ambit of GST laws under Schedule III of the CGST Act.

• Prima Facie Deletion of Levy: Upon examining the copy of the sale deeds and correlating them with the entries in Form 26AS, the Court noted that the transactions prima facie represented a pure sale of immovable property, thereby attracting zero liability under GST enactments.

• Orders Quashed and Remanded: Recognizing that the tax was levied due to the non-evaluation of ownership documents at the lower level, the High Court quashed both the Section 73 assessment order and the Section 161 rectification order.

• Direction for Fresh Adjudication: The matter was remitted back to the Assessing Officer to pass a fresh order on merits after providing due notice and verifying the newly produced sale deeds. The matter was decided in favour of the assessee by way of remand.

Key Takeaways

1. Immovable Property Excluded via Schedule III

Under Section 7 of the CGST Act read with Schedule III, the sale of land and, subject to certain clauses, the sale of buildings, do not constitute a supply of goods or a supply of services. Consequently, the GST department has zero jurisdiction to levy tax on such transactions.

2. Form 26AS Data is Not Automatically Taxable under GST

Income-tax data such as Form 26AS or Annual Information Returns (AIR) cannot be mechanically treated as a reflection of taxable turnover under GST. The department must investigate the underlying nature of the transaction before raising a demand.

3. Procedural Remand to Verify Missing Documentary Evidence

If a taxpayer fails to produce critical evidence (like a registered sale deed) before the Assessing Officer but presents it before a writ court, the court will typically set aside the adverse orders and remand the case, ensuring the tax authority formally reviews the documents to delete illegal tax demands.