HC Upholds GST Penalty on Partners Under Section 122(1A) for Tax Evasion

Case Details: Mayank Bansal vs. Union of India [2026] 187 taxmann.com 394 (Gauhati)

Judiciary and Counsel Details

Devashis Baruah, J.
A.M. Baruah & B. Raichandani, Advs. for the Petitioner.
S.C. Keyal, Sr. Adv. & K. Jain, Adv. for the Respondent.

Facts of the Case

The petitioners, who were partners of a construction firm, were issued a show cause notice under Section 122(1A) of the CGST Act and Assam GST Act, alleging GST evasion on the transfer of development rights and wrongful utilization of ineligible input tax credit. Following an Order-in-Original, a penalty equal to the tax evaded was imposed based on findings that undisclosed cash was collected without invoices and that the petitioners derived personal benefit from transactions executed at their instance. After the first appeals failed, the petitioners filed a writ petition contending that Section 122(1A) applies only to taxable persons, not to partners as natural persons, and that the provision could not be applied retrospectively to past periods. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that while Section 122(1) targets the taxable person, Section 122(1A) intentionally extends liability to any person who causes the transaction and retains its benefit, thereby encompassing the natural persons operating behind an entity structure. The Court observed that Section 122(1A) did not create new violations but merely identified the liable beneficiaries for offences that existed under Section 122(1) since the inception of the Act. It further determined that no issue of retrospectivity arises so long as the show cause notice is issued after the enforcement of Section 122(1A). Consequently, the Court sustained the concurrent findings of the lower authorities and dismissed the writ petition in favour of the Department of Revenue.

List of Cases Reviewed

Shantanu Sanjay Hundekari v. Union of India [2024] 161 taxmann.com 27 (Bombay)/[2024] 105 GST 429 (Bombay)/[2024] 89 GSTL 62 (Bombay) /2024 SCC OnLine, Bom 929
Amit Manilal Haria v. Joint Commissioner, CGST & Central Excise [2026] 184 taxmann.com 119 (Bombay)/[2026] 114 GST 606 (Bombay)/[2026] 107 GSTL 113 (Bombay) /2026 SCC OnLine Bom 1510 (para 37) distinguished
Gurudas Mallik Thakur v. Commissioner of Central GST [2025] 174 taxmann.com 116 (Delhi)/[2025] 98 GSTL 517 (Delhi) 2025 SCC Online Del 3108 (para 38), Jawala Ram v. State of Pepsu 1961 SCC OnLine SC 47 (para 52)
Bhupender Kumar v. Additional Commissioner Adjudication CGST Delhi North [2025] 176 taxmann.com 356 (Delhi)/[2025] 100 GSTL 283 (Delhi) /2025 SCC OnLine Del 4848 (para 53) followed

List of Cases Referred to

Amit Manilal Haria v. Joint Commissioner, CGST & Central Excise [2026] 184 taxmann.com 119 (Bombay)/[2026] 114 GST 606 (Bombay)/[2026] 107 GSTL 113 (Bombay) (para 3)
Shantanu Sanjay Hundekari v. Union of India [2024] 161 taxmann.com 27 (Bombay)/[2024] 105 GST 429 (Bombay)/[2024] 89 GSTL 62 (Bombay) (para 3)
Union of India v. Shantanu Sanjay Hundekari [2025] 171 taxmann.com 36 (SC)/[2025] 109 GST 177 (SC)/[2025] 96 GSTL 385 (SC) (para 17)
Gurudas Mallik Thakur v. Commissioner of Central GST [2025] 174 taxmann.com 116 (Delhi)/[2025] 98 GSTL 517 (Delhi) (para 20)
Bhupender Kumar v. Additional Commissioner Adjudication CGST Delhi North [2025] 176 taxmann.com 356 (Delhi)/[2025] 100 GSTL 283 (Delhi) (para 21),
Mukesh Kumar Garg v. Union of India [2025] 177 taxmann.com 199 (SC)/[2025] 111 GST 341 (SC)/[2025] 101 GSTL 3 (SC) (para 47)
Jawala Ram v. State of Pepsu 1961 SCC OnLine SC 47 (para 57).