2017 (8) TMI 1022 - HC - VAT and Sales Tax

Liability to pay audit fees - what should happen if a registered dealer who is required to make payment for the fees of the special audit defaults in making payment? Does the liability get transferred to the DT&T? - Held that - by virtue of a proviso to Section 142 (2D) of the Income Tax Act, 1961 inserted with effect from 1st June, 2007, in the event of a default by an Assessee in making the payment of fees to the CA for the special audit the expenses so determined shall be paid by the Central Government - In the present case the determination of the fees payable was communicated by the Commissioner to the Petitioner on 3rd June, 2014, i.e., after the amendment came into effect. This was pursuant to the order passed by this Court on 5th May, 2014 in the earlier writ petitions. While the DT&T is right that at the time when the special audit took placed Section 58A (4) of the DVAT Act had not been amended, the fact remains that the fees payable to the Petitioner was determined after the amendment came into force. It is precisely for dealing with a situation where a professional chartered accountant may be left high and dry by a defaulting dealer whose accounts have been specially audited, that Section 58A (4) of the DVAT Act was amended. The Court sees no reason why the benefit of this amendment should not be extended to the Petitioner considering that the fees payable to the Petitioner has been fixed by the of 11 Commissioner only after the amendment came into effect - Nevertheless the Court is also of the view that the power of the Commissioner in these cases to recover from the defaulting dealer the amount paid to the Petitioner should be kept reserved. For the purposes of such recovery, the amount due from the defaulting dealers would be treated as being due in terms of Section 30 of the DVAT Act, particularly since Section 58A (4) of the DVAT Act as it stood prior to 18th June 2012 permitted such recovery. The DT&T will pay the Petitioner of the outstanding fees as determined in terms of the rates fixed by the Commissioner VAT - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Determination of fees for special audit by Chartered Accountants.
2. Payment of fees by registered dealers.
3. Liability of Department of Trade and Taxes (DT&T) in case of default by dealers.

Issue 1: Determination of fees for special audit by Chartered Accountants

The case involved six writ petitions filed by a firm of Chartered Accountants seeking directions for the Department of Trade and Taxes (DT&T) to honor bills for special audit work done under the Delhi Value Added Tax Act. The Petitioner highlighted that the remuneration for the audit work was to be in line with the norms set by the Institute of Chartered Accountants of India (ICAI). The Commissioner was directed to determine the fees payable to the Petitioner for the audit work carried out, and the Petitioner contended that the fees should be paid as per the ICAI rates. The Court upheld the Commissioner's determination of fees and rejected the Petitioner's claim to be paid at ICAI rates.

Issue 2: Payment of fees by registered dealers

The Commissioner determined the fees payable by registered dealers to the Petitioner for the special audit work, and the fees were paid in four out of six matters. In the remaining two cases, the fees were not paid as determined by the Commissioner. The Court dismissed the objection of the DT&T regarding the timeliness of the writ petitions, stating that they were filed within the permissible period. The Court also rejected objections to the maintainability of the petitions, as they were based on previous orders that had attained finality.

Issue 3: Liability of DT&T in case of default by dealers

The question arose regarding the liability of the DT&T if a registered dealer defaulted in paying the fees for the special audit. The relevant sections of the DVAT Act were analyzed, both before and after an amendment in June 2012. The Court noted that the amendment allowed for the determination and payment of fees by the Commissioner, shifting the liability from the dealer. The Court directed the DT&T to pay the outstanding fees to the Petitioner within four weeks, with the power of the Commissioner to recover the amount from defaulting dealers reserved.

In conclusion, the judgment clarified the determination and payment of fees for special audit work by Chartered Accountants, addressed issues related to payment by registered dealers, and outlined the liability of the DT&T in case of default by dealers, ensuring fair compensation for professional auditors while upholding the legal framework of the DVAT Act.