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By
K.S.NAVEEN KUMAR
Advocate, Bangalore
K.S.NAVEEN KUMAR, ADVOCATE1
Audit, Assessment, Revision, Demand,
Recovery, Appeal & Misc.Provisions
Scope of session
K.S.NAVEEN KUMAR, ADVOCATE2
PRELUDE
AUDIT AND ASSESSMENT
DEMAND AND RECOVERY, REVISION
APPEAL
MISC.PROVISIONS INCLUDING ANTI-PROFITEERING
Audit
K.S.NAVEEN KUMAR, ADVOCATE3
Meaning of ‘Audit’
Relevant statutory provisions (sections 65 & 66)
Current regime
Defn.of audit
2(13) “audit” - examination of records, returns and other
documents maintained or furnished by the registered person
under this Act or the rules made thereunder or under any
other law for the time being in force to verify the correctness
of turnover declared, taxes paid, refund claimed and input
tax credit availed, and to assess his compliance with the
provisions of this Act or the rules made thereunder.
Accounts and records – sec.35
Sec. 35(5) - Every registered person whose turnover during a
financial year exceeds the prescribed limit shall get his
accounts audited by a chartered accountant or a cost
accountant and shall submit a copy of the audited annual
accounts, the reconciliation statement under sub-section (2)
of section 44 and such other documents in such form and
manner as may be prescribed.
Departmental audit – sec.65
Commissioner or any officer authorised by him, by way of a
general or a specific order, may undertake audit of any
registered person for such period, at such frequency and in
such manner as may be prescribed.
Conduct audit at the place of business of the registered
person or in their office.
Registered person to be informed by way of a notice not less
than fifteen working days prior to the conduct of audit in
such manner as may be prescribed.
Dept.audit… The audit under sub-section (1) shall be completed within a
period of three months from the date of commencement of the audit:
Commissioner may extend – reasons to be recorded - by a further period not exceeding six months.
“commencement of audit” shall mean the date on which the records and other documents, called for by the tax authorities, are
made available by the registered person or the actual institution of audit at the place of business, whichever is later.
Authorised officer may require the registered person,— (i) to afford him the necessary facility to verify the books of account or other documents as he may require; (ii) to furnish such information as he may require and render assistance for timely completion of the audit.
Dept.audit…
On conclusion - proper officer shall, within thirty days,
inform the registered person, whose records are audited,
about the findings, his rights and obligations and the reasons
for such findings.
Where audit results in detection of tax not paid or short paid
or erroneously refunded, or input tax credit wrongly availed
or utilised, the proper officer may initiate action under
section 73 or section 74.
Special audit – sec.66
At any stage of scrutiny, inquiry, investigation or any other
proceedings before him, any officer not below the rank of
Assistant Commissioner, having regard to the nature and
complexity of the case and the interest of revenue, is of the
opinion that the value has not been correctly declared or the
credit availed is not within the normal limits, he may, with
the prior approval of the Commissioner, direct such
registered person by a communication in writing to get his
records including books of account examined and audited by
a chartered accountant or a cost accountant as may be
nominated by the Commissioner.
Special audit… CA or Cost accountant so nominated to submit report within
ninety days duly signed and certified by him to the said Assistant Commissioner mentioning specified particulars.
Extension possible by Assistant Commissioner may, on application by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason - further period of ninety days.
This audit is notwithstanding that the accounts of the registered person have been audited under any other provisions of this Act or any other law for the time being in force
Registered person to be given an opportunity of being heard in respect of any material gathered, which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.
Audit expenses including the remuneration of such chartered accountant or cost accountant, shall be determined and paid by the Commissioner and such determination shall be final.
If special audit results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer may initiate action under section 73 or section 74.
Audit
K.S.NAVEEN KUMAR, ADVOCATE12
Issues/concerns:
Departmental audit – whether possible?
Special Audit Vs Departmental Audit
CAG Audit – whether possible?
Issuance of SCN by audit
Value Addition
Pre-audit by CAs
Impact Study
How to handle audit?
Audit Inquiry – Reply
Final Audit Observations – Reply
Approach
Reply up to the point
Lead evidence to support
Audit team has no power to collect tax
Even if liability accepted – file a reply – explain – contest
penalty
Insist on audience
Follow up with letter
Assessment
K.S.NAVEEN KUMAR, ADVOCATE15
Meaning of ‘Assessment’
Current regime
Definition in section2(11)
Self-assessment
Re-assessment
Best Judgment Assessment
Summary Assessment
Provisional Assessment
Definition of assessment – sec.2(11)
(11) “assessment” means determination of tax liability under
this Act and includes self-assessment, re-assessment,
provisional assessment, summary assessment and best
judgment assessment
Self-assessment – sec.59
59. Every registered person shall self-assess the taxes payable
under this Act and furnish a return for each tax period as
specified under section 39.
Provisional asst. – sec.60 If the taxable person is unable to determine the value of goods or
services or both or determine the rate of tax applicable thereto, hemay request the proper officer in writing giving reasons forpayment of tax on a provisional basis
Officer shall pass an order, within a period not later than ninetydays from the date of receipt of such request, allowing payment oftax on provisional basis at such rate or on such value as may bespecified by him.
Taxable person to execute a bond in such form as may beprescribed, and with such surety or security as the proper officermay deem fit, binding the taxable person for payment of thedifference between the amount of tax as may be finally assessedand the amount of tax provisionally assessed.
Prov.asst…
Proper officer shall, within a period not exceeding six
months from the date of the communication of the
provisional order pass the final assessment order after taking
into account such information as may be required for
finalizing the assessment:
On sufficient cause shown and for reasons to be recorded in
writing – time limit can be extended by the JC or Addl.
Commissioner for a further period not exceeding six months
and by the Commissioner for such further period not
exceeding four years
Prov.asst….
The registered person shall be liable to pay interest on any
tax payable on the supply of goods or services or both under
provisional assessment but not paid on the due date specified
under sec.39(7) or the rules made thereunder, at the rate
specified under sec.50(1), from the first day after the due
date of payment of tax in respect of the said supply of goods
or services or both till the date of actual
Prov. Asst…
payment, whether such amount is paid before or after the
issuance of order for final assessment.
If registered person is entitled to a refund consequent to the
order of final assessment interest shall be paid on such refund
as provided in section 56
Scrutiny of Returns – sec.61
Proper officer may scrutinize return and related particulars to
verify the correctness of the return and inform him of the
discrepancies noticed – seek explanation
If explanation acceptable - registered person shall be informed -
no further action shall be taken
If no satisfactory explanation furnished within 30 days or further
period or where the registered person, after accepting
discrepancies, fails to take the corrective measure - proper
officer may initiate appropriate action - sections
65/66/67/73/74
Asst.of non-filers of returns – sec.62 62. (1) Notwithstanding anything to the contrary contained in
section 73 or section 74, where a registered person fails to furnish thereturn under section 39 or section 45, even after the service of a noticeunder section 46, the proper officer may proceed to assess the tax
liability of the said person to the best of his judgementtaking into account all the relevant material which is available or whichhe has gathered and issue an assessment order within a period of fiveyears from the date specified under section 44 for furnishing of theannual return for the financial year to which the tax not paid relates.
(2) Where the registered person furnishes a valid return within thirtydays of the service of the assessment order under sub-section (1), thesaid assessment order shall be deemed to have been withdrawn but theliability for payment of interest under sub-section (1) of section 50 orfor payment of late fee under section 47 shall continue.
Asst.of unregistered persons – sec.63
63. Notwithstanding anything to the contrary contained in
section 73 or section 74, where a taxable person fails to obtain
registration even though liable to do so or whose registration has
been cancelled under sub-section (2) of section 29 but who was
liable to pay tax, the proper officer may proceed to assess the tax
liability of such taxable person to the best of his judgment for
the relevant tax periods and issue an assessment order within a
period of five years from the date specified under section 44 for
furnishing of the annual return for the financial year to which the
tax not paid relates:
Provided that no such assessment order shall be passed without giving
the person an opportunity of being heard.
Summary asst.in certain cases –
sec.64 64. (1) The proper officer may, on any evidence showing a tax liability of
a person coming to his notice, with the previous permission of Additional Commissioner or Joint Commissioner, proceed to assess the tax liability of such person to protect the interest of revenue and issue an assessment order, if he has sufficient grounds to believe that any delay in doing so may adversely affect the interest of revenue: Provided that where the taxable person to whom the liability pertains is
not ascertainable and such liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and liable to pay tax and any other amount due under this section.
(2) On an application made by the taxable person within thirty days from the date of receipt of order passed under sub-section (1) or on his own motion, if the Additional Commissioner or Joint Commissioner considers that such order is erroneous, he may withdraw such order and follow the procedure laid down in section 73 or section 74.
Assessment
K.S.NAVEEN KUMAR, ADVOCATE26
Issues/concerns:
Time limit for issuing SCN
Time limit for passing orders
Orders passed in some other case – time limit NA
Reasonable time limit??
Assessment in different States??
Assessment by whom??
Revision
K.S.NAVEEN KUMAR, ADVOCATE27
Revision of lower authority’s order by a superior authority
Similar to SMR proceedings – current regime
When revision is possible?
Revision
K.S.NAVEEN KUMAR, ADVOCATE28
Issues/concerns:
Time limit for revision proceedings
If issue already pending before the appellate authority
Handling Litigation – practical
approach Adjudication stage:
First step after SCN Date of service Relied upon documents Visiting factory/premises Marshalling facts Gathering evidence Expert evidence Preparing reply
Jurisdiction
Merits
Limitation
Quantification
Penalty/Interest
DEMAND AND RECOVERY
NORMAL PERIOD – sec.73
SCN by proper officer
Tax not paid or short paid or erroneously refunded or ITC
wrongly availed or utilised for any reason
Situations not involving fraud or any wilful-misstatement or
suppression of facts to evade tax
Serve notice on the person chargeable with tax
Show cause - amount with interest under section 50 and
penalty leviable under the provisions of this Act or the rules
should not be demanded
Normal period – demand
Time limit – SCN at least three months prior to the time limit
specified for issuance of order.
Subsequent period - proper officer serve a statement on the
person chargeable with tax
Service of such statement deemed to be service of notice on such
person – if grounds are the same
Normal period – demand
Person chargeable with tax may, before service of notice
or statement pay tax with interest on the basis of his own
ascertainment of such tax or the tax as ascertained by the
proper officer and inform the proper officer in writing of
such payment
Proper officer, on receipt of such information, shall not serve
any notice or statement in respect of tax so paid or any
penalty payable under the provisions of this Act or the rules
made thereunder
Normal period – demand
If proper officer finds the amount paid falls short of actuals –
SCN for short payment
If person chargeable with tax pays with interest within 30
days of issue of SCN - no penalty payable - all proceedings
deemed to be concluded
Normal period – demand
Where liability not accepted - proper officer to consider
representation - 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 issue
an order.
Time limit for passing order - within 3 years from the due
date for furnishing of annual return for the financial year to
which the tax not paid or short paid or input tax credit
wrongly availed or utilised relates to or within three years
from the date of erroneous refund
Normal period – demand
Sec.73(11) Notwithstanding anything contained in sub-
section (6) or sub-section (8), penalty under sub-section (9)
shall be payable where any amount of self-assessed tax or any
amount collected as tax has not been paid within a period of
thirty days from the due date of payment of such tax.
Extended period – demand – sec.74
Tax not been paid or short paid or erroneously refunded or
where input tax credit has been wrongly availed or utilised by
reason of fraud, or any wilful-misstatement or suppression of
facts to evade tax
Proper officer to serve notice on the person chargeable with
tax
Tax plus interest and penalty equivalent to tax
Extended period…
Proper officer to issue the notice – atleast 6 months prior to
the time limit for issuance of order
Subsequent periods – Service Statement on the person
chargeable with tax
Service of statement deemed to be service of notice –
extended period cannot be invoked – other grounds same as
earlier notice
Extended period…
Person chargeable with tax may, before service of notice pay
tax with interest and penalty equivalent to 15% of tax on the
basis of his own ascertainment or as ascertained by proper
officer and inform the proper officer in writing of such
payment
Proper officer, on receipt of such information, shall not serve
any notice or statement in respect of tax so paid or any
penalty payable under the provisions of this Act or the rules
made thereunder
Extended period…
If proper officer finds the amount paid falls short of actuals –
SCN for short payment
Extended period …
If person chargeable with tax pays tax with interest and a
penalty equivalent to 25% of such tax within thirty days of
issue of the notice - all proceedings in respect of the said
notice shall be deemed to be concluded
The proper officer shall, after considering the representation,
if any, made by the person chargeable with tax, determine
the amount of tax, interest and penalty due from such person
and issue an order.
Extended period…
Where liability not accepted - proper officer to consider
representation - determine the amount of tax, interest and
penalty equivalent due from such person and issue an order.
Time limit for passing order - within 5 years from the due
date for furnishing of annual return for the financial year to
which the tax not paid or short paid or input tax credit
wrongly availed or utilised relates to or within three years
from the date of erroneous refund
Extended period…
If any person served with an order pays tax with interest and
a penalty equivalent to 50% of such tax within 30 days of
communication of the order - all proceedings in respect of
the said notice deemed to be concluded.
Explanation 1.—For the purposes of section 73 and this
section,— (i) the expression “all proceedings in respect of
the said notice” shall not include proceedings under section
132;
Extended period….
Expln.(ii) - where notice issued to main person liable to tax
and some other persons – if proceedings against main person
concluded u/s. 73 or 74 - proceedings against all persons
liable to pay penalty under sections 122, 125, 129 and 130
deemed to be concluded
Extended period…
Explanation 2.––For the purposes of this Act, the expression
“suppression” shall mean non-declaration of facts or
information which a taxable person is required to declare in
the return, statement, report or any other document
furnished under this Act or the rules made thereunder, or
failure to furnish any information on being asked for, in
writing, by the proper officer.
Gen.principles for determination of tax
– sec.75
If service of notice or issuance of order is stayed by an order
of a court or Appellate Tribunal, the period of such stay shall
be excluded in computing the period specified in sub-
sections (2) and (10) of section 73 or sub-sections (2) and
(10) of section 74, as the case may be.
Gen.principles…
If any Appellate Authority or Appellate Tribunal or court
concludes - notice issued u/s.74(1) - not sustainable –
extended period fails - the proper officer shall determine the
tax payable by such person, deeming as if the notice were
issued u/s.73 for normal period
Gen.principles…
(3) Where any order is required to be issued in pursuance of
the direction of the Appellate Authority or Appellate Tribunal
or a court, such order shall be issued within two years from
the date of communication of the said direction.
(4) An opportunity of hearing shall be granted where a
request is received in writing from the person chargeable
with tax or penalty, or where any adverse decision is
contemplated against such person.
Gen.principles…
(5) The proper officer shall, if sufficient cause is shown by the
person chargeable with tax, grant time to the said person and
adjourn the hearing for reasons to be recorded in writing:
Provided that no such adjournment shall be granted for more
than three times to a person during the proceedings.
(6) The proper officer, in his order, shall set out the relevant
facts and the basis of his decision. (7) The amount of tax,
interest and penalty demanded in the order shall not be in
excess of the amount specified in the notice and no demand
shall be confirmed on the grounds other than the grounds
specified in the notice.
Gen.principles…
(8) Where the Appellate Authority or Appellate Tribunal or
court modifies the amount of tax determined by the proper
officer, the amount of interest and penalty shall stand
modified accordingly, taking into account the amount of tax
so modified.
(9) The interest on the tax short paid or not paid shall be
payable whether or not specified in the order determining
the tax liability.
Gen.principles…. (10) The adjudication proceedings shall be deemed to be
concluded, if the order is not issued within three years as provided for in sub-section (10) of section 73 or within five years as provided for in sub-section (10) of section 74.
(11) An issue on which the Appellate Authority or theAppellate Tribunal or the High Court has given its decisionwhich is prejudicial to the interest of revenue in some otherproceedings and an appeal to the Appellate Tribunal or theHigh Court or the Supreme Court against such decision ofthe Appellate Authority or the Appellate Tribunal or the HighCourt is pending, the period spent between the date of thedecision of the Appellate
Gen.principles…
Authority and that of the Appellate Tribunal or the date of
decision of the Appellate Tribunal and that of the High Court
or the date of the decision of the High Court and that of the
Supreme Court shall be excluded in computing the period
referred to in sub-section (10) of section 73 or sub-section
(10) of section 74 where proceedings are initiated by way of
issue of a show cause notice under the said sections.
Gen.principles…
(12) Notwithstanding anything contained in section 73 or
section 74, where any amount of self-assessed tax in
accordance with a return furnished under section 39 remains
unpaid, either wholly or partly, or any amount of interest
payable on such tax remains unpaid, the same shall be
recovered under the provisions of section 79.
(13) Where any penalty is imposed under section 73 or
section 74, no penalty for the same act or omission shall be
imposed on the same person under any other provision of
this Act.
Handling Litigation
Investigation Stage
Adjudication Stage
Appellate Stage
Writ proceedings
Investigation Stage – practical steps
Issue of summons
Who should attend
Can some one avoid attending summons
Consequence of avoidance
How to attend summons and submit documents
Recording Statements
Statements recorded under coercion, threat etc.
Investigation Stage…
Retraction of statements
Legal effect of un-retracted statement
Obtaining copy of Statement
Whether a CA can attend summons??
Search and seizure operations
Precautions to be taken
Documents seized – drawing of mahazar/seizure memo
Presence of witnesses during search and seizure operations
Investigation stage….
Authorisation to search
Effect of illegal search
Recovery during investigation
Garnishee proceedings
Appeal
K.S.NAVEEN KUMAR, ADVOCATE57
Meaning of ‘appeal’
Current regime
Statutory provisions – ss.107 to 121
First appeal – to appellate authority
Second appeal – to Tribunal
High Court – Question of law
Supreme Court – Question of law
Appeal
K.S.NAVEEN KUMAR, ADVOCATE58
Mandatory Pre-deposit – 1st appeal/2nd appeal
Department can plead for higher pre-deposit??
Condonation powers in case of delay
Dept.appeal – whether possible?
Cross objections before Tribunal?
No power of remand for first appellate authority?
First appellate authority – Union/State??
Appeal… Authorised representative Vs GSTP?
GSTP formats – disciplinary action?
National Bench, Regional Benches, State Bench/Area Benches
HC or SC – only question of law
Tribunal final fact finding authority
Appeal to HC/SC – entire amount to be paid
National Litigation Policy – matter concluded not a precedent
Electronic and physical filing
Appeal
K.S.NAVEEN KUMAR, ADVOCATE60
Issues/concerns:
Delay beyond condonable period –Writ Petition??
Recovery during pendency of appeal or before expiry of time
limit to file an appeal
Revision
K.S.NAVEEN KUMAR, ADVOCATE61
Revision of lower authority’s order by a superior authority
Similar to SMR proceedings – current regime
When revision is possible?
Revision
K.S.NAVEEN KUMAR, ADVOCATE62
Issues/concerns:
Time limit for revision proceedings
If issue already pending before the appellate authority
Misc.ProvisionsS.143 Job work
S.144 Presumption as to documents in certain cases
S.145 Admissibility of micro films, facsimile copies of documents and computer
printouts as documents and as evidence
s.146 Common portal
s.147 Deemed export
s.148 Special procedure for certain processes
s.149 GST compliance rating
s.150 Obligation to furnish information return
Misc.provisions…s.152 Bar on disclosure of information
s.153 Taking assistance from an expert
s.154 Power to take samples
s.155 Burden of proof – eligibility of ITC
s.156 Persons deemed to be public servants for IPC
s.157 Protection of action taken under this Act
s.158 Disclosure of information by a public servant
s.159 Publication of information in respect of certain cases
Misc.Provisions…s.160 Assessment proceedings etc not to be invalid on certain
grounds
s.161 Rectification of errors apparent on the face of record
s.162 Bar on jurisdiction of civil courts
s.163 Levy of fee
s.164 Power of Government to make rules
s.165 Power to make regulations
s.166 Laying of rules, regulations and notifications
s.167 Delegation of powers
Misc.Provisions..s.167 Delegation of powers
s.168 Power to issue instructions or directions
s.169 Service of notice in certain circumstances
s.170 Rounding off of tax etc.
s.171 Anti-profiteering measure
s.172 Removal of difficulties
s.173/174 Omission of ST law – Repeal and Saving clause
Sec 174 rw Sec 6 of General
Clauses Act
67
Sec 174 (1) –The below mentioned Acts will be repealed except
in certain cases
- the Central Excise Act, 1944 (except as respects goods included in
entry 84 of the Union List of the Seventh Schedule to the
Constitution),
- the Medicinal andToilet Preparations (Excise Duties) Act, 1955,
- the Additional Duties of Excise (Goods of Special Importance)
Act, 1957,
- the Additional Duties of Excise (Textiles and Textile Articles) Act,
1978, and
- the Central ExciseTariff Act, 1985
Sec 174 r/w Sec 6 of General
Clauses Act
68
Repeal of earlier acts not to impact the following—
(a) revive anything not in force or existing at the time of such
amendment or repeal; or
(b) affect the previous operation of the amended Act or
repealed Acts and orders or anything duly done or suffered
thereunder; or
(c) affect any right, privilege, obligation, or liability acquired,
accrued or incurred under the amended Act or repealed
Acts or orders under such repealed or amended Acts
Sec 174 rw Sec 6 of General
Clauses Act
69
Provided that any tax exemption granted as an incentive
against investment through a notification shall not continue
as privilege if the said notification is rescinded on or after
the appointed day; or
(d) affect any duty, tax, surcharge, fine, penalty, interest as are
due or may become due or any forfeiture or punishment
incurred or inflicted in respect of any offence or violation
committed against the provisions of the amended Act or
repealed Acts; or
Sec 174 rw Sec 6 of General
Clauses Act
70
(e) affect any investigation, inquiry, verification (including scrutiny and
audit), assessment proceedings, adjudication and any other legal
proceedings or recovery of arrears or remedy in respect of any
such duty, tax, surcharge, penalty, fine, interest, right, privilege,
obligation, liability, forfeiture or punishment, as aforesaid, and any
such investigation, inquiry, verification (including scrutiny and
audit), assessment proceedings, adjudication and other legal
proceedings or recovery of arrears or remedy may be instituted,
continued or enforced, and any such tax, surcharge, penalty, fine,
interest, forfeiture or punishment may be levied or imposed as if
these Acts had not been so amended or repealed;
Sec 174 rw Sec 6 of General
Clauses Act
71
(f) affect any proceedings including that relating to an
appeal, review or reference, instituted before on, or after
the appointed day under the said amended Act or repealed
Acts and such proceedings shall be continued under the
said amended Act or repealed Acts as if this Act had not
come into force and the said Acts had not been amended or
repealed.
(3) The mention of the particular matters referred to in
sub-sections (1) and (2) shall not be held to prejudice or
affect the general application of Section 6 of the General
Clauses Act, 1897 with regard to the effect of repeal.
Concerns
Whether GST is a game changer or a name changer?
Seamless Credit or Seems-to-be-less Credit?
Transformation of Tax System – possibility?
Compliance Nightmare?
Dual Administrative Control?
Corruption?
Anti-profiteering mechanism
High Rates?
Migratory Steps for professionals Knowledge updation
Attending Sessions
Speaker
Participant
Keep track of updates/changes
By being part of study circle
Updates in Institute Website
Writing articles/ Books
K.S.NAVEEN KUMAR, ADVOCATE74
Queries??
K.S.NAVEEN KUMAR, ADVOCATE75
Thanks for your generous and unconditional
listening