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TMI Blog2019 (3) TMI 1762X X X X Extracts X X X X X X X X Extracts X X X X ..... d of Rs. 7,97,42,283/- has been raised. Copies of the assessment order and the demand notice are impugned at Annexures 8 and 8/1 respectively to the writ petition. Two interlocutory applications bearing I.A. No.9486 of 2018 and I.A. No.9487 of 2018 have also been filed seeking additional prayers for issuance of Form C-II as well for addition of parties. The petitioner is a public limited company incorporated under the Companies Act, 1956 and having its registered office at New Delhi and at Secunderabad in the State of Andhra Pradesh with its regional office situated at 203, Shanti Complex, S.P. Verma Road, Patna. The petitioner obtained registration under the Bihar Value Added Tax Act, 2005 (hereinafter referred to as the 'VAT Act'), the Central Sales Tax Act, 1956 (hereinafter referred to as the 'CST Act') and the Bihar Tax on the Entry of Goods Into Local Areas for Consumption, Use of Sale Therein Act, 1993 (hereinafter referred to as the 'Entry Tax Act') bearing TIN Nos.10050748029, 10050643204 and 10050742183 respectively. The petitioner claims to have filed his quarterly as well as annual returns including the audit reports within the time stipulated for the financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2017-18. He submits that Comptroller and Auditor-General ('CAG' for the sake of brevity) held its audit on 07.09.2018 raising objection in relation to Input Tax Credit and which has resulted in the order impugned. Learned senior counsel in reference to the provisions of section 24(3) of the 'VAT Act' submits that every registered dealer is required to furnish his return for the financial year before the 'due date' which term is explained as '31st day of December of the year following the year to which such return relates'. According to Mr. Giri, the audit could not have preceded the due date for even if the petitioner filed his returns on 30.08.2018, the due date would fall in December, 2019 and no audit thus could take place prior to the said date. He submits that despite such legal position, the petitioner received a notice together with the audit objection, a copy of which is enclosed at Annexure 5 series. The petitioner was asked to respond to the audit objection. According to Mr. Giri, the petitioner appeared and submitted before the respondent no.3 i.e. the Assistant Commissioner, Commercial Taxes, Patliputra Circle, Patna that since the assessment for the period 2015-16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed authority and rule 21(2) of 'the Rules' allows the prescribed authority to carry a scrutiny before the expiry of the due date or the extended due date. He submits that since there was some difficulties prevailing in relation to online filing of returns for the financial year 2017-18 that the due date was extended to 31.03.2019 and not as argued by Mr. Giri. Learned counsel thus submits that the due date in the present case was extended up to 31.03.2019 and since the returns were not put to scrutiny under section 25 of the 'VAT Act' read with rule 21 of 'the Rules', that it was a case of deemed assessment under section 26(1) of the 'VAT Act' and whereupon the 'CAG' had full jurisdiction to carry out audit on the basis of the returns so filed and to raise their objection which suffers no infirmity. Learned counsel in reference to section 33 of the 'VAT Act' submits that it relates to assessment on the basis of audit objection. He further submits that the term 'assessment' cannot be given a restricted meaning to cover only cases where an order of assessment or re-assessment is passed by the Assessing Authority, rather it would cover cases of deemed assessment as well because i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted under sub-section 26(3) or otherwise that reasonable ground exists to believe that a dealer has been under assessed or has escaped assessment or has been assessed at lower rate or any deduction therefrom has been wrongly made or any input tax credit incorrectly made that he shall, in the manner prescribed and after serving notice on the dealer, proceed to assess or reassess as the case may be, the tax payable by such dealer, within 4 years from the expiry of the year during which the original order of assessment or re-assessment was passed. The stipulations which we have discussed above relate to assessment/re-assessment of an escaped turnover detected on the basis of a departmental audit conducted under the orders of the Commissioner. However, the issue in hand is not founded on a departmental audit rather it is on the audit objection by the 'CAG' and which situation is catered by section 33 of the 'VAT Act' and reads under: "33. Assessment of tax based on audit objections.- Where an objection has been made by the Comptroller and Auditor-General of India in respect of an assessment or re-assessment made or scrutiny of any return filed under this Act, the prescribed authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no such reference in section 33 that similar powers can be exercised by the 'CAG' to hold audit in cases of deemed assessment. In circumstances thus, where the pre-requisites to an exercise of assessment/re-assessment based on an audit objection of the department and by the 'CAG' are so distinctly delineated, it would be reading in between the provisions to extend the overriding power vested in the Commissioner of the department to hold audit even in case of deemed assessment, in the 'CAG' even though the Legislative intent present in section 33 is silent on such conferment. In fact with the legislative intent so clear, it is difficult to accept the arguments advanced by Mr. Vikash Kumar, learned Standing Counsel No.11 to justify audit conducted by the 'CAG' under section 33 in reference to section 26(1) of the 'VAT Act'. We are fortified in our opinion by the language present in rule 25 of 'the Rules' which prescribes the procedure to be followed on an objection raised by the 'CAG' and requires the Assessing Authority to consider and be satisfied on the lawfulness of the objection before he proceeds to re-assess the tax but in case he is not satisfied by the objection so made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory authority acting thereunder, enlarge the scope of its exercise nor can he travel beyond the statutory provisions to draw power from other prescriptions available in the enactment simply because it caters to a similar situation. The complete non-application of mind with which the issue has been handled is manifest from the audit report itself available at Annexure 5 which after recording the alleged excess Input Tax Credit claimed by the petitioner relegates him to a proceeding under section 31(2) of the 'VAT Act' completely oblivious of the fact that while it is under the statutory prescriptions of section 33 that the power was being exercised by the 'CAG', section 31(2) of the 'VAT Act' is a penalty exercise in circumstances where an assessment/re-assessment is conducted on the basis of an audit conducted under the orders of the Commissioner under section 26(3) of the 'VAT Act' and not on the basis of audit objection by the 'CAG' under section 33 of the 'VAT Act'. The illegalities in the proceeding do not stop here rather are perpetuated by the mechanical discharge by the Assessing Authority who has blindly proceeded on the audit objection without recording any satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 31(2) of the 'VAT Act' which is not available to a proceeding initiated on an audit objection made by the 'CAG' under section 33. Mr. Giri has also raised an issue that the order was passed ex-parte but considering that the petitioner did respond to the notice vide Annexure 5 and kept taking time on the pretext of pending assessment for the financial years 2015-16 and 2016-17, it is not a case of ex-parte assessment rather a case of the petitioner failing to respond to the notice. To that extent we do not subscribe with the arguments advanced by Mr. Giri. Having heard learned counsel for the parties and for the reasons and discussions that we have held above, we are persuaded to hold that neither the discharge by the 'CAG' to record their audit objection at Annexure 5 is in tune with the statutory prescriptions because the provision underlying the 'VAT Act' does not vest jurisdiction in the 'CAG' to hold audit on the basis of deemed assessment and thus the audit report is held illegal and without statutory support and consequentially the assessment proceeding based thereon are rendered illegal because not only the prescribed authority has proceeded on an illegal audit obje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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