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TMI Blog2024 (7) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... be summarized as follows: the petitioner received a show cause notice dated 05.09.2023 calling upon him to show cause with regard to disclosing a lower sales turnover in comparison to the purchase turnover. Upon receipt of two reminders, by reply dated 06.11.2023, the petitioner informed the respondent that the sales turnover was reported in the subsequent month. The impugned order dated 23.12.2023 was issued in the said facts and circumstances. Counsel and their contentions: 3. Oral arguments on behalf of the petitioner in W.P.No.15307 of 2024 were advanced by Ms.G.Vardini Karthik, learned counsel. As regards W.P.No.15330 of 2024, oral arguments were advanced by Mr.T.C.Prakash, learned counsel. In both writ petitions, Mr.C.Harsha Raj, learned Additional Government Pleader, advanced arguments on behalf of the respondent. 4. Ms.G.Vardini Karthik advanced the following contentions: (i) The show cause notice discloses that proceedings were initiated against the petitioner on the basis of scrutiny of returns and the discrepancies noticed during such scrutiny. She contends that Section 61 of applicable GST enactments is attracted in relation to scrutiny of returns. She further subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the COVID-19 pandemic. When the limitation period was extended by reference to the time taken in scrutiny and audit work, she submitted that such scrutiny by issuance of an ASMT-10 notice in compliance with Section 61 read with Rule 99 is a mandatory pre-requisite for adjudication under Section 73. (vi) By relying on the judgment of the Hon'ble Supreme Court in Assistant Commissioner of Income-tax v. Hotel Blue Moon [2010] 188 Taxman 113 (SC), learned counsel submitted that the Supreme Court concluded that a notice under Section 143(2) of the Income Tax Act is mandatory when the assessing officer decides to repudiate the assessee's return of income. By analogy, she submits that the procedure under Section 61 read with Rule 99 is also mandatory before adjudication. (vii) The last contention of learned counsel was that Rule 142 of applicable GST rules, which imposed the requirement of a pre-show cause notice intimation in Form DRC-01A, was held to be mandatory, until such rule was subsequently amended, by recognizing the use of the mandatory word 'shall' in pre-amended Rule 142. For this proposition, she relied on the judgment of this Court in Shri Tyres v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndhra Pradesh High Court noticed the provisions relating to scrutiny and audit and concluded that Section 73 opens with the phrase "where it appears to the proper officer that any tax has not been paid", thereby indicating that adjudication can be initiated not only on the basis of scrutiny under Section 61 or audit under Section 65 but also on the basis of credible information from a different source. (ii) His next contention was that the object and purpose of Section 61 is to gather information with regard to discrepancies and provide an opportunity to the tax payer to remedy such discrepancies, wherever such discrepancies are remediable. (iii) He countered the contention made by relying on Graziano Trasmissioni by submitting that the said judgment refers to scrutiny and audit as preparatory work for adjudication and not as a condition precedent. (iv) By referring to the judgments of the Hon'ble Supreme Court in Sathyanath & Another v. Sarojamani, Civil Appeal No.3680 of 2022 and the judgment in Amardeep Singh v. Harveen Kaur, Civil Appeal No.11158 of 2017, he contended that the Hon'ble Supreme Court held that procedural provisions are intended to be a handmaid of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74. Rule 99 Central Goods and Services Tax Rules, 2017 Scrutiny of returns (1) Where any return furnished by a registered person is selected for scrutiny, the proper officer shall scrutinize the same in accordance with the provisions of section 61 with reference to the information available with him, and in case of any discrepancy, he shall issue a notice to the said person in FORM GST ASMT-10, informing him of such discrepancy and seeking his explanation thereto within such time, not exceeding thirty days from the date of service of the notice or such further period as may be permitted by him and also, where possible, quantifying the amount of tax, interest and any other amount payable in relation to such discrepancy.(emphasis added) (2) The registered person may accept the discrepancy mentioned in the notice issued under sub-rule (1), and pay the tax, interest and any other amount arising from such discrepancy and inform the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inform the proper officer in writing of such payment. (6) The proper officer, on receipt of such information, shall not serve any notice under subsection (1) or, as the case may be, the statement under sub-section (3), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder. (7) Where the proper officer is of the opinion that the amount paid under subsection (5) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short of the amount actually payable. (8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded. (9) The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selected for scrutiny", reinforces the conclusion that scrutiny is undertaken at the option and not the obligation of the proper officer. This leads to the question as to whether the requirements of Section 61 and Rule 99 become mandatory once a return is selected for scrutiny, which I turn to next. 11. The text of sub-section (1) of Section 61 indicates clearly that the obligation to issue notice to the registered person is not triggered merely by the selection of the returns of such person for scrutiny, but by the discovery of discrepancies in such returns on scrutiny. Thus, upon fulfilment of two conditions, namely, selection of returns for scrutiny and the discovery of discrepancies on such scrutiny, there is an obligation to issue notice. Rule 99(1) uses the language "and in case of any discrepancy, he shall issue a notice to the said person in Form GST ASMT-10", thereby raising the presumption that the obligation is mandatory. Sub-sections (1) to (3) make it clear that the purposes of such notice are to: enable the registered person to provide an explanation; discontinue action if the explanation is in order; or, either if the explanation is not satisfactory or corrective me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment assessment of non-filers subject to conditions prescribed therein) or Section 63(assessment of unregistered persons) or Section 64 (summary assessment), no assessment, including reassessment, is undertaken under Section 61. Therefore, the consequence of not issuing the ASMT-10 notice, in spite of noticing discrepancies after selecting and scrutinizing returns, would be that it vitiates the scrutiny process, including the discrepancies noticed thereby and the quantification, if any, done in course thereof. As regards adjudication, the limited impact would be that the scrutiny under Section 61 cannot be relied upon for adjudication. 15. In view of the above conclusions on the legal questions, the factual question as to whether the respective petitioner's returns were selected for scrutiny under Section 61 has limited significance. This contention was advanced on the basis that the subject description in the impugned order in W.P. No.15307 of 2024 refers to scrutiny of returns and the discovery of discrepancies. On examining the preceding show cause notice, there is no reference to scrutiny under Section 61. Instead, data from the GSTR-01 and GSTR-3B returns are set out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the replacement of the last three words "for any reason" with "by reason of fraud, or any wilful misstatement or suppression of facts to evade tax", the opening phrases of Sections 73 and 74 are identical. As interpreted by the Andhra Pradesh High Court in Devi Traders, the use of the words 'where it appears to the proper officer' indicates that adjudication may be initiated not only as a consequence of scrutiny under Section 61, audit under Section 65, special audit under Section 66 or inspection under Section 67, but also upon receipt of information from other sources. On closely examining both Sections 61 and Section 73, I find no indication in either provision that scrutiny of returns and the issuance of notice in Form ASMT-10 constitute a mandatory pre-requisite for adjudication even in cases where returns were scrutinized. I am also inclined to accept the contention of learned AGP that Vadivel Pyrotech is distinguishable inasmuch as, in that case, notice in Form ASMT-10 was issued and such notice was replied to. Thereafter, the adjudication covered discrepancies not covered in the earlier ASMT-10 notice and learned AGP agreed to issue a notice in Form ASMT-10 bef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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