Audit u/s.65 completed for 2017-2023 period. Scrutiny Notice received u/s.61

[Raam Srinivasan Swaminathan Kalpathi]

Our company was subjected to GST department audit for the years 2017-2020 and also from 2020-2023 tax years u/s. 65. Now department has again intimated discrepancy upon scrutiny of Returns u/s. 61 for 2019-20 and 2021-22.  Request the distinguished experts their view and the way forward.  Profuse thanks

[Sadanand Bulbule]

Since your company has already been audited under Section 65 in depth for those years, doing another check on the same issues for the same period amounts to repeating the same work. Its unnecessary and unfair, unless there is a new issue which is not covered by the audit already conducted.

You may represent the factual postion to the  concerned authority. If not convinced, bring it to the knowledge of the jursdictional higher authorities in writing for suitable intervention.

[KASTURI SETHI]

It is not feasible to examine ALL the records thoroughly during the allotted days for conducting audit. 

[Sadanand Bulbule]

Sagacious response Sirji. 

[CSSANJAY MALHOTRA]

2025 (3) TMI 170 - ORISSA HIGH COURT

 

In cases, where audit has already been conducted, the same cases cannot be selected for scrutiny of returns. Scrutiny leads to audit and not vice-versa. Instructions No. 02/2022 dated 22.03.2022  and Instruction No. 02/2023 dated 26.05.2023 issued by CBIC clarifies that if the scrutiny undertaken requires detailed verification the same should be referred to Audit Commissionerate.

Where audit u/s 65 has already been conducted by GST authorities, there can not also a further scrutiny u/s 61 – Various Higher Court have held this as the legislature intended there should not be overlap in making probe. Hence the scrutiny notice received post Audit is against the GST statutory provisions. 

 

[Raam Srinivasan Swaminathan Kalpathi]

Profuse thanks to the learned experts for their views and case law references.  Long live TMI

[KASTURI SETHI]

It would be the longest battle for the assessee/noticee.

[Raam Srinivasan Swaminathan Kalpathi]

In this case, the audit was conducted by the CGST department.  The timeline taken was around 6 weeks.  Further, the scrutiny notice has been received by CGST department.  Experts to give their valuable opinion.  Thanks

[Raam Srinivasan Swaminathan Kalpathi]

Sorry, Sec.61 scrutiny notice was also received from the same CGST department.

[Padmanathan KV]

I do not see any legal or procedural bar in department initiating section 61 proceedings for the period for which audit under section 65 was carried out. Of course, this is subject to provisions of section 6(2)(b).

Practically, if there is any overlapping of information, you can reply to the Department about the same.

[Padmanathan KV]

This is also subject to the limitation periods under section 73/ 74 etc... as the outcome of neither audit nor scrutiny has mentioned in the query.

[KALLESHAMURTHY MURTHY K.N.]

Sir, 

I agree with the views of Sri Sadanand Bulbule Sir.  

Once an audit is concluded and the findings communicated (in FORM GST ADT-02), the next appropriate step for any unresolved issues would be demand and recovery proceedings under Section 73 or 74, not a re-initiation of the formal scrutiny process for the same period for the same issue and even that once the returns are verified during the audit process, it is considered as all the issues are covered. It is unfair to prepare another audit report for the same period. However, in case it appears to be riskier of higher revenue implications, it may be possible with prior approval of the higher authorities and go for Sec. 73 or 74 without referring to audit. subject to the statutory limitation period. 

[KASTURI SETHI]

Issuance of Final Audit Report (Form GST ADT-02) does not mean clean chit for the Audit Period. In case the short levy/non-levy/non-payment of tax (if detected subsequently) is NOT hit by statutory  time limitations,  Proper Officer can  act   under Section 61 of CGST ACT. Proper Officer may be Audit Officer, Range Officer, Preventive Officer etc. as defined under Section 2 (91) of CGST Act

[Shilpi Jain]

Do check whether the issues reported in the scrutiny match with issues clarified in the audit? If yes, you can mention that these were checked during audit and clarified and provide evidences for the same.

Also, for the periods up to 19-20 no valid demand can be raised. So to that extent you can communicate and not provide the details.

[Raam Srinivasan Swaminathan Kalpathi]

To update the panelists:

I took the advise of respected Sri.Kathuriji and decided to once again submit the details called for.  Submitted the audit report and the connected audit paras all of which were accepted during audit and tax due remitted for FY 2020-21 including ITC availed, details of supply for the year, RCM paid etc.  Also, provided details of the 10 issues raised u/s. 61 in ASMT-11

There were some minor amounts of late fees which was overlooked during audit and this was duly remitted.

Suptt confirmed satisfaction in ASMT-12.

Although I took the path of least resistance, I was happy that the client was not burdened with any tax demand.  The entire exercise sapped 3 days of my time and was really stressful and exhausting to say the least.

Thanks to all the panelists

[KASTURI SETHI]

Sh.Raam Srinivasan Swaminathan Kalpathi Ji,

Sir,

Thanks a lot for updating. Your tell-tale expression/experience would guide others. 

 

                                                  

AI Summary

GST audit under section 65 followed by section 61 scrutiny clarified as permissible, subject to section 6(2)(b) safeguards A taxpayer audited under GST section 65 for 2017-2023 later received scrutiny notices under section 61 for some of the same periods. Forum experts differed: some argued repeat scrutiny post-audit is impermissible and contrary to CBIC instructions and judicial precedents that discourage overlap between audit and scrutiny, while others maintained there is no express statutory bar, subject to section 6(2)(b) and limitation under sections 73/74. It was noted that ADT-02 does not grant a 'clean chit' and fresh issues or subsequently detected discrepancies may still be examined. The taxpayer ultimately complied, resubmitted records, paid minor late fees, and received closure (ASMT-12) without additional tax demand.