Invalidly constituted audit team renders VAT assessment unsustainable where the foundational report is prepared contrary to mandatory rules.

An audit assessment under the Odisha Value Added Tax Act, 2004 cannot stand where the foundational Audit Visit Report is prepared by an audit team not constituted in strict conformity with Rule 43 of the Odisha Value Added Tax Rules, 2005. The rule was treated as mandatory, not directory, and the officer submitting the report had to be part of a duly constituted audit team. Because the assessment rested exclusively on a report generated by an invalidly constituted team, it was vitiated and liable to be set aside.

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Issues: Whether an audit assessment under the Odisha Value Added Tax Act, 2004 could be sustained when the Audit Visit Report was submitted by an audit team not constituted in accordance with Rule 43 of the Odisha Value Added Tax Rules, 2005.

Analysis: The statutory scheme requires tax audit to be conducted in the prescribed manner and the Audit Visit Report to be submitted by the officer authorised to conduct such audit. Rule 43, as applicable to the relevant period, governed the constitution of the audit team, and the requirement was not merely directory. The use of the word "and" in the rule was held to reflect the intended composition of the team, and the officer submitting the report had to be part of a duly constituted team. An assessment built exclusively on an Audit Visit Report prepared by an invalidly constituted team cannot stand, because where the statute prescribes a manner for doing an act, it must be done in that manner or not at all.

Conclusion: The Audit Visit Report was vulnerable for want of a duly constituted audit team, and the assessment under Section 42 based on it was vitiated and liable to be set aside.

Ratio Decidendi: An audit assessment under the Odisha Value Added Tax Act, 2004 is invalid where the foundational Audit Visit Report is prepared by an audit team not constituted in strict conformity with the governing rules.

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