Sushil Aggarwal

ASAP & ASSOCIATES Chartered Accountants

New Delhi 110 001.

sushil@asap.net.inPh. 2337 1637, 2337 1937

9560196060

DELHI VAT ASSESSMENTS

& REMEDIES

ABOUT US…ASAP & Associates is a firm of Chartered

Accountants having vast experience of 30 years in the field of Tax Management, advisory and Audit. The firm comprises of distinguished Chartered Accountants, Advocates and Management Consultants. It has a complete skill set, experience, a well-knitted network of professionals across the country and a state of the art infrastructure very well geared to offer quality solution to day to day business problems.

PreambleIn this presentation we are

analysing the provisions enunciated under the Delhi VAT Act, 2004 and Rules framed there under relating to various kinds of assessments and remedies available to a dealer.

Types of assessment There are 5 types of assessment:-

1. Deemed assessment

2. Default assessment

3. Notice of assessment of Penalty

4. Audit under section 58

5. Special Audit u/s 58A

6. Miscellaneous assessments

Deemed assessment:

Governing Section : 31 Rules : NilForms: Nil

1. If return is filed as per the provisions of the Act and Rules, it shall be deemed to be the notice of assessment and the assessment is deemed to have been made by Commissioner on the same day of filing the return.

2. Assessment is done on tax period basis not on financial year basis.

3. No separate assessment order is sent.

4. No deemed assessment shall arise if the commissioner has already made an assessment of tax in respect of the same tax period under any other section of the VAT Act.

5. The deemed assessment is of little consequence as other assessments can be framed even if a default assessment is made.

Default assessment

Governing Section: 32 & 32A Form:24 Rules:36

Commissioner may assess or reassess to the best of his judgement the amount of net tax due for a tax period or more than one tax period by a single order if :-

1. Return is not furnished by the prescribed date.

2. Return is incomplete or incorrect.

3. Furnished return does not comply with the requirements of the Act.

4. Commissioner is not satisfied with the return furnished for any other reason.

5. If a dealer is unregistered who otherwise is liable to be registered.

No pre assessment notice is issued to dealer. Assessment order shall be served against which objection can be filed before prescribed authority.

No opportunity of being heard is granted while passing the default assessment order or while imposing penalty u/s 33.

The default assessment of tax and interest is passed in FORM DVAT-24.

Penalty assessmentGoverning Section: 33 Form:24A Rules:36

Where commissioner has a reason to believe that a liability to pay a penalty under this Act has arisen, the commissioner , after recording the reason in writing, shall make and serve on the person a notice of assessment of the penalty that is due under this Act.

The amount of penalty assessed under this section is due and payable on the date on which the notice of assessment of penalty is served by the commissioner.

Where the commissioner makes an assessment of penalty under section33, he shall record the order in FORM DVAT-24A and such notice shall be served to the dealer in the manner prescribed under rule62.

The notice of assessment of penalty under sections 33 of the DVAT Act is actually an order of assessment of penalty.

AUDIT (ASSESSMENT) UNDER SECTION 58:

Governing Section : 58 Rules : 46 Forms: 37Commissioner may serve on any person in Form DVAT-37 a notice

informing him that the audit of his business affairs shall be performed. Earlier assessment if any made u/s 31, 32 or 33 for the subject period is no bar to Audit assessment.

The audit of business affairs can be conducted either at the business premises of the dealer or in the office of the Commissioner.

The audit of business affairs can not be conducted without serving a notice in Form DVAT-37 unlike deemed assessment and default assessments under sections 31, 32 and 33. The Notice should specify the period for which Audit is to be undertaken.

The audit of business affairs under this section is made by the Commissioner or its subordinate authorities who have been empowered by the Commissioner in this regard. No time limit is fixed for completion of Audit proceedings.

The commissioner after considering the return and the evidences acquired in the course of audit or any information otherwise available to him, either-

a) Confirm the assessment under review; OR

b) Serve a notice of the assessment or re-assessment of the amount of tax, interest & penalty.

Assessment based on Special Audit under section 58A:-

Governing Section : 58A Rules :Nil Forms: Nil(1) If the Commissioner, having regard to.

(a) the nature and complexity of the business of a dealer; or

(b) the interest of the revenue; or

(c) volume of accounts; or

(d) doubts about the correctness of the accounts; or

(e) multiplicity of transactions in the accounts; or

(f) specialised nature of business activity; or

(g) non-production of all records and accounts; or

(h) non-filing of audit report under section 49 of this Act; or

(i) any other reason. is of the opinion that it is necessary so to do, he may direct the dealer by a

notice in writing to get his records including books of accounts, examined and audited by an accountant or a panel of accountants or any other professional or panel of professionals nominated by the Commissioner in this behalf and to furnish a report of such examination and audit in the format that he may specify, duly signed and verified by such accountant or panel of accountants or professional or panel of professionals and setting forth such particulars as may he specified.

(2) The provision of sub-section (1) shall have effect notwithstanding that the accounts of the dealer have been audited under any other provision of this Act or any other law for the time being in force or otherwise.(3)  Every report under sub-section (1) shall be furnished by the dealer to the Commissioner within such period as may be specified by the Commissioner:     Provided that the Commissioner may, on an application made in this behalf by the dealer and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit:     Provided further that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred eighty days from the date on which the direction under sub-section (1) is received by the dealer.  (4) The expenses of, and incidental to, the examination and audit of records under sub-section (1), (including the remuneration of the accountant or a penal of accountants or professional or panel of professionals) shall be determined and paid by the Commissioner and that determination shall be final.

Vast powers have been conferred upon the Commissioner to order for a special audit. Further there is no provision to issue notice of being heard to the dealer before issuing notice/order for special audit.

The Special Audit can be directed even if the accounts of the dealer have already been audited under VAT Act or any other law say Companies Act, Income Tax Act.

On the basis of the report of Special Auditor, the commissioner can issue a notice u/s 58 to the dealer for framing assessment order. On receipt of such notice the dealer can rebut the observations made by the Auditor.

 LIMITATIONS OF ASSESSMENT AND RE-ASSESSMENT

Section 34

(a) SIX YEARS: Where commissioner has reason to believe that tax was not paid due to concealment or omission or failure to disclose material particulars on the part of person

(b) FOUR YEARS: In all except (a) & (c)

(c) ONE YEAR: Remand assessment

Miscellaneous Assessments

•Based on survey/enforcement report•Based on non production of true and complete documents by the incharge of lorry transporting goods.

Computation of the Period:

IN CASE OF ASSESSEMENT and REASSESMENT:- From the end of the year comprising of one or more tax periods for which the person furnished a return under section 26 or 28 of this act OR from the date on which commissioner made an assessment of tax, for the tax period, whichever is earlier.

IN CASE OF REMAND ASSESSEMENT:-The commissioner may make an assessment of tax within one year after the date of any decision of the appellate tribunal or court where the assessment is required to be made in consequence of, or to give effect to, the decision of the appellate Tribunal or court which requires the re-assessment of the person

SUOMOTO REVISIONGoverning Section : 74A Rules :36A Forms: 24B

(1) After any order including an order under this section or any decision in objection is passed under this Act, rules or notifications made thereunder, by any officer or person subordinate to him, the Commissioner may, of his own motion or upon information received by him, call for the record of such order and examine whether -           (a) any turnover of sales has not been brought to tax  or has been brought to tax at lower rate, or has been incorrectly classified, or any claim is incorrectly granted or that the liability to tax is understated, or           (b) in any case, the order is erroneous, in so far as it is prejudicial to the interest of revenue,                                  and after examination, the Commissioner  may pass an order to the best of his judgment, where necessary.

(2)(a) For the purpose of the examination and passing of the order, the Commissioner may require, by service of notice, the dealer to produce or cause to be produced before him such books of accounts and other documents or evidence as he thinks necessary for the purposes aforesaid.    (b) Notwithstanding anything contained to the contrary in section 34, no order under this section shall be passed after the expiry of four years from the end of the year in which the order passed by the subordinate officer has been served on the dealer. (c) Notwithstanding anything contained to the contrary in section 34, where in respect of any order or part of the said order passed by the subordinate officer, an order has been passed by any authority hearing the objection or any appellate authority including the Tribunal or such order is pending for decision in objection or  in appeal, or an objection or an appeal is filed, then, whether or not the issues involved in the examination have been decided or raised in the objection or the appeal, the Commissioner may,  within five years of the end of the year in which the said order passed  by the subordinate officer has been served on the dealer, make a report to the said objection hearing authority or the appellate authority including the Tribunal regarding his examination or the report or the information received by him and the said appellate authority including the Tribunal shall thereupon, after giving the dealer a reasonable opportunity of being heard, pass an order to the best of its judgment, where necessary. 

(3) If the Commissioner has initiated any proceeding before an appropriate forum against an issue which is decided against the revenue by an order of the Tribunal, then the Commissioner may, in respect of any order, other than the order which is the subject matter of the order of the Tribunal, call for the record, conduct an examination as aforesaid, record his findings, call for the said books of account and other evidence and pass an order as provided for under this section as if the issue was not so decided against the revenue, but shall stay the recovery of the dues including the interest or penalty, insofar as they relate to such issue until the decision by the  appropriate forum and after such decision, may modify the order of revision, if necessary.

(4) No proceedings under this section shall be entertained on any application made by a dealer or a person.

REMEDIES :Following remedies are available to the assessee:

1. Review

2. Rectification of mistakes

3. Objection

4. Appeal

5. Determination

REVIEW

Governing Section : 74B Rules :36B Forms: 38C

Any assessment or re-assessment made or order passed under this act of the rules made there under by any person appointed under section 66 may be reviewed by such person suo moto or upon the application made in that behalf

Assessee can apply for the review of the order within within 30 days (60 days in case of Order passed by Tribunal) from date of service of the Assessment or Reassessment Order in the following circumstances:

Discovery of new & important matter or evidence which after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time of order was made.

On account of some mistake or error apparent on the face of the record

For any other sufficient reason, desire to obtain a review of the order made against him.

Orders pending before the objection hearing authority or the Delhi VAT Tribunal cannot be reviewed.

The commissioner shall not review any assessment or re-assessment or an order where an objection under section 74 or an appeal under section 76 against such assessment or re-assessment or order is pending for decision.

Review can be applied in form DVAT-38C. In case of filing objection or appeal assessee should withdraw his application for review before such filing.

RECTIFICATION OF MISTAKESGoverning Section: 74B Rules: 36B Forms: 38B & 38C

The commissioner may at any time within 4 years from the end of the year in which any order passed by him has been served , on his own motion , rectify any mistake apparent on record.

The Commissioner shall within the said period or thereafter rectify any such mistake which has been brought to his notice within the said period by any person affected by such order.

The order can be rectified by the commissioner even after the expiry of four years if the mistake has been brought in his notice within the said four years.

Where rectification has the effect of reducing the amount of tax or penalty or interest , the commissioner shall refund the amount and where it has the effect of enhancing the amount of tax or penalty or interest or reducing the refund the commissioner shall recover the amount.

The power to rectify its order is also available to the objection hearing authorities as well as appellate authorites in respect of every order passed by them.

The authority who has passed the impugned order is eligible to rectify its order.

That part of order which has been duly considered and decided in an Objection/ appeal/review can not be rectified.

Rectification Vs. Review:

Rectification application should be filed in Form 38B whereas application for review is to be made in Form 38C.

Rectification application can be made, at any time within 4 years from the end of the year in which any order passed has been served where as Review application can be made within 30 days (60 days in case of Order passed by Tribunal) from date of service of the Assessment or Reassessment Order.

Rectification is made for the mistake apparent on the face of the records whereas review can be applied

i. on discovery of new & important matter or evidence which after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time of order was made.

ii. On account of some mistake or error apparent on the face of the record

iii. For any other sufficient reason, desire to obtain a review of the order made against him.

Objection or Appeal can not be filed without withdrawing the review application.

OBJECTION Governing Section : 74 Rules : 51 to 57 Forms:

38 to 41

Any person who is not satisfied with an assessment or any order or decision made under the DVAT Act, may make an objection against such assessment order or decision to the commissioner. If any person is not satisfied with the decision given under objection hearing authority then he can file appeal before the Delhi VAT Appellate Tribunal.

Objectionable orders (u/s 74(1)) include the decision of the commissioner to reject a method of calculating a tax credit, rejection of registration of a person, notice of assessment of tax or penalty, disqualification of any legal practitioner , CA or VAT practitioner, any other order which is not specifically categorised as non objectionable orders u/s 79.

Even failure of the commissioner to pass an order within 6 months after a request in writing was served by the person shall be an objectionable orders (u/s 74(2)). The request may relate to -1. Reach at a decision2. Issue an assessment or order, or3. Undertake any other procedure under this Act.

To file objection under this section aggrieved person shall first give a notice to the authority in writing stating the failure of the latter and take the acknowledgement thereof. If the authority still fails to dispose the notice within 6 months from the date of its service, the person can exercise his powers under this section and can file an objection.

Non objectionable orders includes:

1. Decision of commissioner to make and assessment of penalty or tax.

2. Notice requiring a person to furnish a return

3. Notice issued under section 58 & 59.

4. Decision of the commissioner to notify any matter.

5. Notice asking dealer to show cause for not to be prosecuted for an offence.

6. Decision relating to seizure or retention of books of accounts or other documents. Or sanctioning a prosecution under this Act.

7. Interim decision made in the course of any proceedings.

8. Decision of the commissioner to give effect to an order of the appellate tribunal or a court.

9. Determination u/s 84 or Order passed u/s 85 passed by the Commissioner himself.

10. Action of the Commissioner under section 84(10) for withdrawal or qualification of determination already issued.

Conditions for filing an objection: Objection cannot be made against non-objectionable order

mentioned u/s 79. Undisputed amount of tax, interest or penalty assessed has been

paid. The commissioner after giving the dealer opportunity of being

heard, may direct him to deposit the amount deemed to be reasonable before such objection is entertained.

Only one objection can be made by the person against any assessment or order.

In case of an amended assessment or order or decision , objection may be made only to the portion amended.

Objection has to be filed in the form DVAT-38 accompanied with the fees of Rs.50 in the form of court fee along with fully stated in detail the grounds of objection ,statement of facts and the relief claimed.

It shall be submitted in triplicate with one copy, duly signed to the commissioner or to the VAT Authority. Where fresh evidences is sought to be produced, the objection shall be accompanied by a memorandum of the evidence sought to be so produced, stating clearly the reasons for not producing it earlier , before the authority whose order is the subject of objection.

LIMITATIONS FOR OBJECTION :

Time limit for filling objection under section 74(1): It shall be filed within two months of the date of service of the assessment or order or decision.

Time limit for filling objection under section 74(2): It shall be filed within two months after the lapse of 6 months from the date of service of the written request by the person(i.e. no sooner than 6 months and no later than 8 months from the date of request).

The limitation period is extendible Up to 2 months if the person was prevented for sufficient reason from lodging the objection within the time specified. In such case objection shall be accompanied by the statement in form DVAT-39 showing the reason for the delay in making the said objection.

DISPOSAL OF OBJECTION:

Objection will be disposed of after examination of assessment or order or decision, as the case may be, the objection and other documents (registers, records , the objection and any other information or report which is relevant) or information as may be relevant.

The person aggrieved shall be afforded an opportunity of being heard in person if that person makes such request.

Within 3 months after the receipt of the objection, the commissioner either

a) Accepts the objection in whole or in part and take appropriate action to give effect to the acceptance: or

b) Refuse the objection or a part of the objection.

In either case he will serve on the person objecting, a notice in writing of the decision and the reasons for it, including a statement of the evidence on which it is based.

The decision of the commissioner deciding the objection shall be intimated to the applicant in form DVAT 40 and shall be served on the person making the objection in the manner prescribed under rule 62.

LIMITATIONS FOR DISPOSAL OF OBJECTION:

Sec74(7):Time limit is 3 months which can to be extended by the commissioner for further 2 months after notifying the person in writing.

The person may, in writing request the commissioner to allow more time for hearing in which case the period of adjournment shall not be counted towards the period by which the commissioner shall reach his decision.

Sec 74(8):Where the commissioner has not notified the person of his decision within the time specified under subsection (7) the person may serve a written notice in form DVAT-41 requiring him to make the decision within 15 days.

If the decision has not been made within or by the end 15 days after being given notice under section 74(8), the commissioner shall be deemed to have allowed the objection.

APPEAL BEFORE THE APPELLATE TRIBUNAL:

Governing Section : 76 Rules :57A to 57C Forms:38A

If any person is aggrieved by the decision of the commissioner under section 74, 84 & 85, he may file an appeal before the Appellate Tribunal. Against the said order. It is similar to the second appeal in the Delhi Sales Act.

Every memorandum of appeal against an order of assessment shall be made in form DVAT-38A accompanied by a fee of Rs.50 in form of court fee stamps along with clear statement of facts, precise grounds of appeal and relief claimed.

The Commissioner does not appeal to the Appellate Tribunal but may make a re-assessment of tax where he is of the opinion that further tax is owed.

Every appeal shall be filed in triplicate with 3 copies (at least one should be certified). Copies other than certified should be attested by the appellant or his authorised representative as true copies.

The appeal shall be accompanied by satisfactory proof of the payment of the amount in dispute and any other amount assessed as due from the person.

Restrictions on the appellant is that the person aggrieved shall be limited to disputing and argue only those matters stated in the objection. If any fresh evidence is produced then it shall be accompanied by a memorandum of evidence stating clearly the reasons for not producing the same before.

The Tribunal shall not set aside an assessment and remit the matter to the commissioner for further assessment ,unless:-

It has advised the aggrieved person of the proposed order. Offered the person opportunity of being heard to adduce any further

evidence.

Where the tribunal sets aside an assessment and remits the matter to commissioner for further assessment the tribunal shall pass an order to refund some or all of the amount in dispute, failing which it shall be presumed that the appellate tribunal has ordered the refund of the amount in dispute.

The appellate tribunal may rectify any mistake or error apparent from the records of its proceedings.

Any order passed by the Tribunal may be reviewed suo-moto or upon application made in the behalf provided that before any order which is likely to effect any person adversely, he should be given an opportunity of being heard.

LIMITATIONS FOR APPEAL:

Sec-76(2):It shall be produced within 2 months from the date of service of the decision appealed against.

The appellate authority may admit an appeal u/s 76 after the period of limitation laid down in that section, if it is satisfied that appellant has sufficient cause for not preferring the appeal within such period.

Where an appeal is made after the expiry of the period specified under section 76(2) ,it shall be accompanied by a petition setting forth the facts showing sufficient cause for delay.

No appeal can lie against the non appealable orders as mentioned in Sec.79 and described above.

DISPOSAL OF THE APPEAL:If the Tribunal does not reject the appeal summarily, it shall fix a

date for its hearing and send a notice to the appellant and the commissioner. In case of failure of a person to attend the hearing it may adjourn the proceedings, strike out the appeal or proceed to make an order determining the appeal in the absence of the person.

The Appellate tribunal shall not entertain any fresh evidence on behalf of the appellant unless it is satisfied that the appellant was prevented by sufficient cause from producing such documents before the authority against whose order the appeal has been preferred.

The Appellate tribunal shall not at the hearing of appeal allow the appellant to go into any ground of appeal not specified in memorandum of appeal unless the appellate tribunal is satisfied that omission of that ground there from was not wilful or unreasonable.

Appeal to High CourtAn appeal shall lie to the High Court from every order passed by

the Appellate Tribunal in appeal under this Act, if the high court is satisfied that the case involves a substantial question of law.

The commissioner or the other party aggrieved by the order passed by the tribunal may file an appeal to high court within 60 days from the date on which the order is appealed against is received by the commissioner or served upon other party. The High Court may admit the appeal after 60 days if it is satisfied that there was sufficient cause for not filing it within that period.

The High Court on being satisfied that the case involves a substantial question of law, shall formulate such question of law which shall further become the only subject matter to be heard at the hearings of appeal.

Where an appeal has been filed to High court it shall be heard by a bench of not less than 2 judges and shall be decided in accordance with the opinion of such judges or of the majority ,if any, of such judges.

APPEAL TO SUPREME COURT

Appellate jurisdiction of Supreme Court is conferred by Articles 132 to 136 of the Constitution of India.

DETERMINATIONGoverning Section : 84 Rules :58 Forms:42

(1)  If any determinable question arises, otherwise than in proceedings before a court, a person may apply in the prescribed manner to the Commissioner for the determination of that question.

      (2)  Subject to sub-section (3) of this section, an application for the determination of a determinable question may be made in respect of a proposed transaction, a transaction that is being undertaken, or a transaction has been concluded.

      (3)  An application for the determination of a determinable question may not be made after -

           (a) the Commissioner has commenced the audit of the person pursuant to section 58 of this Act; or

           (b) the Commissioner has issued an assessment for the tax period in which the transaction that is the subject of the determinable question occurred.

(4)  For the purposes of this section, the following shall be determinable questions:-      (a) whether any person, society, club or association or any firm or any branch or department of any firm is or would be a dealer;      (b) whether any dealer is or would be required to be registered under this Act;      (c)  the amount of the taxable quantum of a dealer for a period;      (d) whether a transaction is or would be a sale, or requires an adjustment to be made under section 8 of this Act arising out of a sale;      (e)  whether a transaction is or would be in the nature of works contract, or transfer of right to use any goods;      (f) whether a sale is not liable to tax under section 7 of this Act;      (g) whether a sale is exempt from tax under section 6 of this Act;      (h) the sale price of a transaction;  (i) the proportion of the turnover or turnover of purchases of a dealer which arises in a tax period, and the time at which an adjustment to tax or tax credit arises;      (j) whether any transaction is or would be the import of goods;

      (k) the value of any goods imported into Delhi;      (l)  the rate of tax that is payable on a sale or import of goods and the classification of the goods under the Schedules;      (m) whether a transaction is the purchase of goods, or requires an adjustment to be made under section 10 of this Act arising out of a purchase;      (n) the amount of any tax credit to which the dealer is entitled in respect of a purchase or import of goods;      (o) the amount of any tax credit in respect of any used goods purchased by a dealer;      (p) the location of any sale or purchase;      (q) the application of a composition scheme in the circumstances of the dealer; or      (r)  the tax period of a dealer.

(5)  The Commissioner shall make the determination within such period as may be prescribed.       (6)  Where -           (a) the Commissioner fails to make a determination under this section within the time prescribed under sub-section (5) of this section;           (b) the person thereafter implements the transaction which is the subject of the application and in the manner described in the application; and           (c)  the person has, in the application for the determination of the determinable question, indicated the answer to the determinable question which the person believes to be correct (in this section called the "proposed determination");      the Commissioner shall be deemed for the purposes of this Act to have made and issued to the person on the day after the expiry of the prescribed period, a determination of the determinable question in the terms of the proposed determination.

 (7)  The Commissioner may -           (a) direct that the determination shall not affect the liability of any person under this Act with respect to any transaction effected prior to the determination;           (b) limit the period for which the determination will apply;           (c) limit the transactions to which the determination will apply; and           (d) impose such other limitations or restrictions on the determination as seem appropriate.      (8)  If any such question arises from any order already passed under this Act or under the Delhi Sales Tax Act, 1975 (43 of 1975) or the Delhi Sales Tax on Works Contract Act, 1999 (Delhi Act 9 of 1999) or the Delhi Tax on Entry of Motor Vehicles into Local areas Act, 1994 (Delhi Act 4 of 1995), as then in force in Delhi, no such question shall be entertained for determination under this section but such question may be raised in an objection or appeal against such order.

 (9)  Where -           (a) the Commissioner has issued to

a person a determination in respect of a particular transaction; and

           (b) the person implements the transaction based on the determination issued to him under this section and in the manner described in the application;

no assessment may be raised by the Commissioner against that person which is inconsistent with the determination and no penalty may be imposed on the person if the determination is later held incorrect.

• Applicant for determination shall furnish a concise statement of the case stating therein precisely the question to be determined, indicating clearly the basis of the question.

• It shall be given in DVAT-42 with requisite fee.• The statement of the case shall contain a

declaration that a question submitted for determination does not arise from any order passed under the act.

DISPOSAL OF DETERMINATIONDetermination shall be made within a period of 6 months from the

date of submission of question.

Deemed disposal in case where: the commissioner fails to make a determination under this

section within 6 months. The person thereafter implements the transaction which is the

subject of the application and in the manner described in the application.

The person has, in the application for the determination indicated the answer to the determinable question(i.e. proposed determination)