9911796707
TMI Blog2008 (9) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... court was delivered by B.N. MAHAPATRA J. In this writ petition the petitioner challenges the notice dated July 16, 2008 issued under sub-rule (2) of rule 44 of the Orissa Value Added Tax Rules, 2005 (hereinafter referred to as, the OVAT Rules ) under annexure 1 for the purpose of conducting tax audit for the period from April 1, 2005 till the date of audit visit on the ground that the audit assessments for the period April 1, 2005 to March 31, 2006 and April 1, 2006 to October 31, 2006 were already completed earlier under section 42 of the Orissa Value Added Tax Act, 2004 (hereinafter called as the OVAT Act ) vide assessment orders dated December 2, 2006 (annexure 3 series). Hence, the second notice issued under annexure 1 is not sustainable in the eyes of law. The factual matrix of the case, eliminating unnecessary details, is as follows: The petitioner is a retailer of stationery and allied goods and runs his business in Municipal Market Complex, Talcher. He is registered under the OVAT Act having TIN No. 212713031452. Prior to issuance of the impugned notice dated July 16, 2008 under annexure 1 in form VAT 301, notices under sub-rule (1) of rule 49 of the OVAT R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which falls for consideration by this court is as follows: Whether it is permissible to conduct tax audits as provided under section 41 of the OVAT Act repeatedly for passing fresh audit assessment orders under section 42 of the OVAT Act for a particular period in respect of which earlier an order of assessment under section 42 of the OVAT Act was passed? To resolve the issue it is necessary to know the relevant provisions contained in the OVAT Act and Rules pertaining to tax audit and audit assessment and assessment of escaped turnover. Those are section 41 of the OVAT Act read with rule 41, rule 42, rule 43, rule 44 and rule 45 of the OVAT Rules which deal with identification of tax-payers for tax audit and how the tax audit is to be conducted. Section 42 of the OVAT Act and rule 49 deal with audit assessment. Section 43 and rule 50 deal with turnover escaping assessment. The relevant provisions of section 41, section 42 and section 43 of the OVAT Act are quoted below: Section 41. Identification of tax-payers for tax audit. (1) The Commissioner may select such individual dealers or class of dealers for tax audit on random basis or on the basis of risk analysis or on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such audit and incorporated in the audit visit report. (2) Where a notice is issued to a dealer under sub-section (1), he shall be allowed time for a period of not less than thirty days for production of relevant books of account and documents. (3) If the dealer fails to appear or cause appearance, or fails to produce or cause production of the books of account and documents as required under sub-section (1), the assessing authority may proceed to complete the assessment to the best of his judgment basing on the materials available in the audit visit report and such other materials as may be available, and after causing such enquiry as he deems necessary. (4) Where the dealer to whom a notice is issued under sub-section (1), produces the books of account and other documents, the assessing authority may, after examining all the materials as available with him in the record and those produced by the dealer and after causing such other enquiry as he deems necessary, assess the tax due from that dealer accordingly. (5) Without prejudice to any penalty or interest that may have been levied under any provision of this Act, an amount equal to twice the amount of tax assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be selected at random basis for audit in a year preferably by use of computer. It will be done on the basis of objective criteria and, hence, there will be no human bias in selection. Thus audit cycle will be of five years. The selection shall be done by January 31, or by any date before the end of the year. However, rule 41 empowers the Commissioner to direct audit of any specific issue or issues relating to any dealer or class of dealers in case of any reference by subordinate officers to check tax evasion. He may select for special or investigation of audit on the basis of apparent revenue risk. He may plan audit checks across the totality of the business of tax-payers within an audit circle of two years. Tax audit shall comprise of verification of all records, documents, books of account including records relating to or incidental to the business of the dealer, computation of the input-tax credit as admissible, calculation of output tax charged, physical verification of stock-in-trade, collection of sample goods and examination of such other records and documents as may be required to determine the actual tax liability of the dealer. In course of tax audit, dealer is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deems necessary, assess the tax due from that dealer. Rule 49(6) provides that the assessing authority shall after hearing the dealer assess to the best of judgment the amount of tax payable by the dealer in respect of a tax period or tax periods for which the assessment proceeding has been initiated and impose penalty under sub-section (5) of section 42 of the OVAT Act. Rule 49(7) provides that in the event of default by a dealer to comply with the requirement of the notice in form VAT-306, the assessing authority may make to the best of his judgment an ex parte assessment of the tax payable by such dealer in respect of such tax period or tax periods and pass order of assessment recording the reasons therein. Section 42(6) provides that notwithstanding anything contained to the contrary in any provision under the OVAT Act an assessment under section 42 shall be completed within a period of six months from the date of receipt of the audit visit report. If for any reason the assessment is not completed within the time specified, the Commissioner may, on the merits of each such case, allow such further time not exceeding six months for completion of assessment proceeding. Section 42( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned with the audit assessment. In order to make audit assessment under section 42 of the OVAT Act tax audit report is necessary. Tax audit report is submitted on the basis of tax audit conducted in the place of business of the dealer. In the present case, audit assessment has already been made under section 42 of the OVAT Act for the period from April 1, 2005 to March 31, 2006 and April 1, 2006 to October 31, 2006 vide annexure 3 series pursuant to notices for assessment of tax as a result of audit report issued to the petitioner under sub-rule (1) of rule 49 (vide annexure 2 series). After completion of the audit assessment, if the assessing officer for the reasons stated in section 43 is of the opinion that there was under-assessment or any turnover has escaped assessment, he can proceed to reopen the completed audit assessment and make the reassessment as provided under section 43 of the OVAT Act. The OVAT Act and the Rules framed thereunder have taken care of the situation where a dealer is under-assessed or its turnover has escaped assessment while making audit assessment under section 42 of the Act. The interest of the Revenue is well protected under section 43 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in sub-sections (6) and (7) to section 42 redundant, as the Department in case of failure to complete an audit assessment within the time prescribed can always start a new audit for fresh audit assessment and thereby it will become a never-ending process. It is well-settled principle of law that what cannot be done directly that cannot be done indirectly. In this context, it would be useful to refer the decision of the honourable Supreme Court in S.R. Chaudhuri v. State of Punjab reported in [2001] 7 SCC 126. The issue before the honourable Supreme Court in appeal was: Can a non-member, who fails to get elected during the period of six consecutive months, after he is appointed as a Minister or while a Minister has ceased to be a legislator, be reappointed as a Minister, without being elected to the Legislature after the expiry of the period of six consecutive months? The honourable apex court held that reappointment of Shri Tej Prakash Singh, the respondent, as a Minister with effect from November 23, 1996, after his resignation from the Council of Ministers on March 8, 1996, during the term of the same Legislative Assembly, without getting elected in the meanwhile, was improp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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