Intimation in DRC 01A

[Krishna Murthy]

Can the Assessing Officer, issue an Intimation u/s 73(5) or 74(5) without opening the proceedings or without any proceedings pending before him?

There exists a difference between turnovers reported in GSTR-1 and GSTR-3B due to reporting of earlier period invoices in GSTR-1. However, GSTR-3B all the taxes have been paid.

Is issuance of Intimation in DRC 01A and subsequently SCN in DRC-01 without opening the proceedings a valid one?

[KASTURI SETHI]

Dear Krishna Murthy Ji,

What do you mean by "without opening the proceedings" ? Query-wise reply is as under :-

1. The department never issues intimation under Section 73 (5) or 74(5) without any basis i.e. without investigation/scrutiny. The department can issue an intimation under Section 73(5) or Section 74(5) on the basis of records already available with the department. DRC-1 A is itself an opportunity to defend yourself. If the department is not satisfied with your submissions, then DRC-1 is issued.

2. Proceedings are opened before issuance DRC- 01 A.

[Krishna Murthy]

Thank you sir for your reply. In one case, the department straight away issued Intimation in DRC 01A which states that there is a difference in one particular month turnover comparing GSTR 1 and GSTR 3B and hence the difference tax needs to be paid along with interest.

My query is can the AO straight away ask to pay tax and interest without first asking for the reasons why the difference occurred. The difference between GSTR 3B and GSTR 1 could on account of various reasons like reporting of earlier period supplies in current period GSTR-1 which were already disclosed in GSTR-3B etc. Just taking one month into consideration the AO issued DRC 01A.

My view is that he should have atleast issued ASMT 10 for Scrutiny of Returns u/s 61 or should have called for Audit u/s 65.

[KASTURI SETHI]

You are absolutely right. The department should examine the records for three years cumulatively. By selecting one month is gross injustice with the party. Such assessment is baseless and illogical. Legal validity is not the question here. Every small matter cannot be challenged. This is discretionary power of the proper officer. As per law, the proper officer can do so. Your reasons are full of logical force. You can defend yourself while filing reply to DRC-01 A. Since your reasons and grounds are genuine, the department will have no answer to your submissions. Such like matters can be sorted out with humble request, rather than going for litigation.

[Kashish Gupta]

1. It is also a settled law that adjudicating authority must record the reasons in support of its conclusions. To follow the principles of justice, recording of reasons is must. Once the reasons are recorded, it justifies the decision making on relevant grounds.It is also a settled law that adjudicating authority must record the reasons in support of its conclusions. To follow the principles of justice, recording of reasons is must. Once the reasons are recorded, it justifies the decision making on relevant grounds.
2. It is a settled law that proper officer shall adjudicate the matter before proceeding to issue a show cause notice. In the present case, proper officer has not undertaken adjudication proceedings.

3. Section 74(1) of the GST Act reads as under:

   Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilfull-misstatement or suppression of facts

• Where it appears to the proper officer that...............................

4. The opening lines of section 74 clearly provides that proper officer shall proceeds only in the situation where he has the reasons to believe (where it appears). Since for the present matter, proper officer has been provided with a mechanism to follow under section 61 of the Act, he must adhere to those provisions so as to justify that notice has not been issued with pre-conceived notions or merely as a formality with no intention to adjudicate it.

[KASTURI SETHI]

Gujarat High Court Ahmedabad vide order dated 20.8.20 quashed and set aside the order passed in Form GST DRC-01A dated 23rd July 2020 in the case ofFormative Tex Fab Vs. State of Gujarat = 2020 (8) TMI 603 - GUJARAT HIGH COURT.

AI Summary

Intimation under Section 73/74: issuing DRC-01A must follow recorded reasons and offer taxpayer reply before adjudication. The department may issue Form DRC 01A based on available records to notify a taxpayer of discrepancies and to elicit a response; DRC 01A serves as an opportunity to explain differences between GSTR 1 and GSTR 3B. However, authorities and commentators stress that officers should examine returns cumulatively rather than isolate single months, record reasons for conclusions, and follow statutory scrutiny or audit mechanisms and the requirement to form reasons to believe before invoking enhanced provisions.