One of my client got notice under section 16 (4) . As my client filled gstr3b return for the month of aug-18 to jan19 in the month of dec19 . department is asking to reverse ITC taken in returns month of aug-18 to jan19. while my client have filled returns with late fees and interest on late payment of tax in cash. my question is how department is interpreting section 16(4) for late fillers also . in my view it should be for missing invoices which is not taken in returns . Please guide what to do , and i need clear cut Judgement /rulling in this regard. I also need draft reply against this kind of notices. I am also sending mail in this regard attaching notice issue to my client

Reply—As per provision of section 16(4) of CGST Act, a registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier. 

As your invoice pertains to F.Y. 2018-19, you cannot claim ITC after expiry of due date of September 2019 return.

Section 42 of the CGST Act requires matching of the input tax with corresponding output tax of the supplier. However, the ITC misclassification mistake can be rectified, if the due date of the return of September of the succeeding year has not lapsed [section 16(4) of the CGST Act].

If the due date of September return has lapsed, the assessee is required to pay the incorrectly claimed ITC and any ITC not claimed correctly upto the return of September will lapse. Department’s contention is correct.