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2019 (3) TMI 1762 - HC - VAT and Sales TaxDeemed assessment - audit objection by the ‘CAG’ - Levy of penalty u/s 31(2) of VAT Act - excess amount claimed by the petitioner towards Input Tax Credit - whether this assessment of tax for the financial year 2017-18 by deeming fiction as per section 26 of the ‘VAT Act’ invites an audit objection by the ‘CAG’ and even if it does whether the Assessing Authority has proceeded for re-assessment in the manner prescribed? HELD THAT:- The detail procedure prescribed under rule 22 of ‘the Rules’ for proceeding on a departmental audit objection under the orders of the Commissioner under section 26(3) leading to assessment under section 31 of the ‘VAT Act’ is clearly distinct to the procedure based on a audit objection by the ‘CAG’ for even though the legislature has empowered the Commissioner to hold audit on deemed assessment and initiate an exercise for the purpose of assessment under section 31, no such privilege is given to the ‘CAG’ to exercise jurisdiction on a deemed assessment. 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’. Thus, 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 objection rather he has also failed to record his satisfaction as to the lawfulness of the audit objection and has mechanically proceeded to draw the proceeding under section 33 of the ‘VAT Act’ completely unmindful of the obligation cast on him under rule 25(1) and (2) of ‘the Rules’. The entire proceeding culminating in the assessment order impugned at Annexure 8 together with the demand notice impugned at Annexure 8/1 are quashed and set aside - Petition allowed.
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