2010 (7) TMI 901 - HC - VAT and Sales Tax

High Court Upholds Tax Audit Jurisdiction & Assessment Process, Grants Right to Appeal

The High Court dismissed the writ petition challenging the jurisdiction of the Assistant Commissioner in conducting a tax audit and issuing the Audit ... Whether the Commissioner for Sales Tax, Orissa, having issued notification dated December 1, 2005 (annexure 5), delegating to the Assistant Commissioners of Sales Tax (excluding Intelligence Ranges) to exercise all the powers and duties of the Commissioner specified in section 41(1) and (2) of the OVAT Act and powers specified in rule 41 of the Orissa Value Added Tax Rules, the audit conducted by the Assistant Commissioner of Commercial Tax, Intelligence Range, Cuttack, and the audit visit report (annexure 1) submitted by him pursuant to such audit, is wholly illegal and without jurisdiction Held that:- No impropriety or illegality in the action of the opposite-parties in carrying out the tax audit of the petitioner’s-firm and the subsequent order of assessment passed on the basis of such audit report, so as to warrant any interference. However, as the petitioner has moved this court against the order of assessment, we permit the petitioner to avail of the statutory remedy of appeal, which if filed within four weeks hence, shall be considered on its merit and disposed of in accordance with law. Issues:Challenge to jurisdiction of Assistant Commissioner in conducting tax audit and issuing Audit Visit Report. Submission of audit visit report in form E27 instead of form VAT-303 for audit assessment.Analysis:Issue 1: Challenge to jurisdiction of Assistant CommissionerThe petitioner, a registered dealer, challenged the jurisdiction of the Assistant Commissioner of Commercial Tax, Intelligence Range, Cuttack, in conducting tax audit and issuing the Audit Visit Report. The petitioner argued that the Assistant Commissioner did not have the delegated power to conduct the audit under the Orissa Value Added Tax Act, 2004. The main contention was that the audit conducted and the subsequent audit visit report submitted were illegal and without jurisdiction. The counter-affidavit filed on behalf of the opposite parties stated that the power to select dealers for tax audit was delegated to Assistant Commissioners of Sales Tax, excluding Intelligence Ranges, under a notification by the Commissioner of Sales Tax, Orissa. It was clarified that there was no bar in conducting tax audit by the audit team duly constituted under the rules. The High Court analyzed the notification and relevant provisions of the OVAT Act and Rules, concluding that once the Assistant Commissioner selected the dealer for tax audit, the Intelligence Range was not prohibited from conducting the audit. The statutory provisions aimed to prevent tax evasion and safeguard revenue. The court found no fault in the assessment carried out based on the audit report.Issue 2: Submission of audit visit report in form E27The petitioner raised concerns about the submission of the audit visit report in form E27 instead of form VAT-303 for audit assessment under the OVAT Act. The assessing officer issued a notice of assessment enclosing the audit visit report, to which the petitioner responded, explaining the irregularities mentioned. The court noted that the forms E27 and VAT-303 were substantially similar, both providing for details of the audit. Since the petitioner received a copy of the report and had the opportunity to respond, there was substantial compliance with statutory provisions and principles of natural justice. The court dismissed the challenge regarding the form used for the audit visit report.In conclusion, the High Court dismissed the writ petition as it found no impropriety or illegality in the actions of the opposite parties regarding the tax audit and subsequent assessment. The petitioner was permitted to appeal the order of assessment within four weeks. Chief Justice and another judge agreed with the decision to dismiss the petition.