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2017 (7) TMI 699 - HC - VAT and Sales TaxPrinciples of natural justice - method of selection for audit under Section 43 of the West Bengal Value Added Tax Act, 2003 - Is the Commissioner acting under the provisions of Section 43(1) of the West Bengal Value Added Tax Act, 2003 obliged to give notice, an opportunity of hearing to an assessee and pass a reasoned order prior to making a selection thereunder? - Held that - Sub-section (1) of Section 43 enjoins a duty upon the Commissioner to select assessees for audit. The proviso thereto allows assessees specified therein, if selected under Sub-section (1) to be deemed not to be selected. At the time of selection, the sub-section does not in express words provide for a right of hearing. Sub-section (2) and (3) allows the assessee selected a right of hearing leading to the preparation of report enjoined under Sub-section (3). Sub-section (4) deals with the time frame to complete the audit. Sub-section (5) allows the Commissioner to assess the net tax payable by the assessee. Section 43AB relates to audit by a special team. It is different than Section 43. It operates at a different space. An assessee may have to undergo audit by a special team under Section 43AB, upon the satisfaction of the conditions required thereunder, notwithstanding such assessee not being selected under Section 43. It may have to undergo audit by a special team, even if, it is selected under Section 43. Section 43AB comes into play when the Commissioner has justifiable reasons to believe that the assessee is engaged in an activity detrimental to the State revenue. Section 142(2A) of the Act of 1961 and Section 43 of the Act of 2003 are not pari materia. Section 43 of the Act of 2003 allows a Commissioner to select on a random basis or upon information or otherwise, such percentage or such class or classes of assessees, as may be prescribed, for audit of accounts, registers of documents. The Commissioner, therefore, has to make a selection for the purpose of audit of accounts of an assessee in respect of a financial year. The vires of Section 43(1) of the Act of 2003 is not under challenge in the writ petition. Such sub-section enjoins and casts a duty upon the Commissioner to select a certain prescribed percentage of the assessees. Such percentage may be prescribed. Therefore, in a given financial year there will be a certain percentage of assessees who will be required to undergo an audit in terms of Section 43 of the Act of 2003. The petitioner is one of such assessees undergoing an audit under Section 43 for the financial year 2013-2014. Section 43 mandates a selection of the prescribed percentage. Acting under Section 43 of the Act of 2003 a Commissioner is obliged to select the prescribed percentage in the manner mandated. The petitioner has not substantiated that, the petitioner has been selected beyond the parameters of Section 43. Therefore, the question of giving him a hearing does not arise prior to his selection. Subsequent to the selection the assessee falls within the procedure prescribed in Section 43. It is not that the Commissioner has not understood the accounts and is requiring the assessee to undergo a special audit akin to Section 142(2A) of the Income Tax Act, 1961. There is a distinction between Section 43 and 43AB of the Act of 2003. Section 43AB of the Act of 2003 allows a Commissioner to call for audit of such accounts, records and documents of such assessee by a special team, or tax professional, to be nominated by him if the requirements prescribed under such section are fulfilled. Section 43AB is more akin to Section 142(2A) of the Income Tax Act, 1961. The petitioner is not entitled to any relief in the present writ petition. Petition dismissed - decided against petitioner.
Issues Involved:
1. Is the Commissioner acting under the provisions of Section 43(1) of the West Bengal Value Added Tax Act, 2003 obliged to give notice, an opportunity of hearing to an assessee, and pass a reasoned order prior to making a selection thereunder? 2. What, if any, reliefs are the parties entitled to? Issue-wise Detailed Analysis: Issue 1: Notice and Hearing Requirement under Section 43(1) The petitioner challenged the method of selection for audit under Section 43 of the West Bengal Value Added Tax Act, 2003, arguing it was "arbitrary, illegal and violative of principles of natural justice." The petitioner contended that the Commissioner must notify the assessee, provide an opportunity for a hearing, and pass a reasoned order before selecting an assessee for audit. The petitioner referred to a notice dated October 6, 2015, claiming it lacked reasons and did not provide a pre-selection hearing, thus breaching natural justice principles. The court examined Section 43 and noted that it does not explicitly provide for a pre-selection hearing. Sub-sections (2) and (3) of Section 43 allow for a hearing after the selection, leading to the preparation of an audit report. The court emphasized that the selection process under Section 43 is random or based on information, and requiring a pre-selection hearing would make the selection process "unwieldy and unenforceable." It would also contradict the statutory mechanism, potentially allowing assessees to avoid audits indefinitely. The court distinguished Section 43 from Section 43AB, which involves special audits and is more akin to Section 142(2A) of the Income Tax Act, 1961. The court cited relevant case law, including "Sahara India (Firm) v. Commissioner of Income-Tax & Anr.," which highlighted that administrative orders with civil consequences must adhere to natural justice unless explicitly excluded by statute. However, the court concluded that the nature of the selection process under Section 43 does not necessitate a pre-selection hearing. The petitioner's argument that the affidavit-in-opposition was improperly verified was deemed irrelevant to the issue at hand. Issue 2: Entitlement to Reliefs Given the court's conclusion on the first issue, it held that the petitioner was not entitled to any relief. The writ petition was dismissed, and no costs were awarded. The court reiterated that the selection process under Section 43 did not violate natural justice principles as claimed by the petitioner. Conclusion The court dismissed the writ petition, holding that the Commissioner is not required to provide a notice, opportunity for a hearing, or a reasoned order before selecting an assessee for audit under Section 43(1) of the West Bengal Value Added Tax Act, 2003. The petitioner was not entitled to any relief, and the case was dismissed without costs.
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