Stop Penalizing Honest Taxpayers: ITC Denial is Unconstitutional!

If you’re conducting 9/9C reviews, here’s a critical insight:

Denying Input Tax Credit (ITC) to a bona fide buyer because the seller defaulted violates Article 14 – the Right to Equality.

Tax authorities should pursue the defaulting seller, not punish compliant businesses.

Judicial Clarity on ITC Rights
Recent and past rulings have reinforced this principle:

✅ Supreme Court – Shanti Kiran India (P) Ltd. (2025)
ITC cannot be denied if tax is paid on a valid invoice, even if the seller fails to deposit it. ITC is a statutory right, not a concession.

✅ Arise India Limited (2018)
Treating guilty and innocent purchasers alike is unconstitutional. Buyers cannot predict seller defaults.

✅ Quest Merchandising (2017)
ITC denial is valid only if collusion or fraud is proven.