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2019 (6) TMI 1586 - HC - VAT and Sales TaxJurisdiction - power of Joint Commissioner a lower Authority to order any audit of the particular business dealer - no authorisation or delegation by the Commissioner possible in terms of Section 64(4) of TNVAT Act - HELD THAT - The provisions of sub-Section (4) of Section 64 empowers the Head of the Department viz. the Commissioner to order for an audit of the business of any registered dealer by an officer not below the rank of the Deputy Commercial Taxes Officer who is much lower authority in the hierarchy. It is clear that the said sub-section (4) does not empower the Commissioner to delegate the power to pass order to any lower authority. Therefore the application of mind by the Commissioner himself about the nature of the default by the particular Assessee concerned and therefore there is a need to audit the books of accounts and other revenue records of the business of that Assessee has to be recorded by the Commissioner himself. The words any registered dealer in Sub-Section (4) indicates a singular dealer and not a group of Dealers. Therefore such orders under Section 64(4) cannot be passed for a group of registered dealer in one go. The recording the opinion about the default of the assessee cannot be construed to be an administrative function or administrative order passed by the Commissioner. Therefore such an order under Section 64(4) of the Act can be nothing but a quasi-judicial order entailing civil consequences for the Assessee or Dealer concerned. In view of this the orders to be passed under Section 64(4) of the Act have to meet the principles of natural justice viz. the compliance of the principles of audit alteram partem giving of a notice and opportunity of hearing to the assessee concerned. The Assessee before the Commissioner can always contend that no such default as stipulated in Section 64(4) clauses (a) to (e) is made out against him and if he places such a case before the learned Commissioner it is incumbent upon of the Commissioner to apply mind and pass appropriate speaking and reasoned order in this regard. Therefore passing of an omnibus or general order to audit of business of dealers like done in the present case does not fit in the scheme of Section 64(4) of the Act at all. The power to delegate further is not provided under Section 64(4) of the Act. Therefore the manner in which the impugned order dated 16.05.2014 has been passed by the learned Commissioner laying down certain limits or criterias quoted above leaving it free for the Joint Commissioner to authorise officers below to undertake such audit is wholly untenable and unsustainable order - The audit of the books and accounts of an assessee is required not only under the provisions of Section 64 (4) of the Act but such provisions which may be applicable to the assessee concerned may be under the other relevant statutes also like the provisions of the Companies Act if an assessee is a limited Company under the provisions of the Income Tax Act vide Section 142(2A) thereof as well. The order of the learned Commissioner under Section 64(4) of the Act is a quasi-judicial order requiring a prior notice of hearing to the assessee and passing of a reasoned speaking order in individual cases of registered dealers for conducting audit by the specified Authority as directed by the Commissioner. The order dated 16.05.2014 does not meet these requirements of law at all. The Hon ble Supreme Court in a large number of cases has even held that unless the provisions of the natural justice are specifically excluded by the statutory provisions they can be read into such provisions in the interest of justice. The provisions in Section 64(4) of the Act do not specify anything about the notice for hearing to the registered dealers but the mere absence of such a provision does not prevent this Court from directing such a requirement to be complied with by the Department viz. Commissioner before directing such audit under Section 64(4) of the Act - A reference for this proposition of law can be made to INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA VERSUS LK. RATNA AND OTHERS 1986 (10) TMI 37 - SUPREME COURT . Appeal dismissed - decided against Revenue.
Issues Involved:
1. Legality of the Commissioner's order directing audit under Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006. 2. Authority and delegation of power to order audits. 3. Compliance with principles of natural justice. 4. Validity of general orders for audit of multiple dealers. Detailed Analysis: 1. Legality of the Commissioner's Order Directing Audit: The learned Single Judge held that the order of the Commissioner of Commercial Taxes directing an audit of the business of the assessee dealer was not sustainable. The order did not satisfy the conditions and criteria laid down in Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006. The Commissioner failed to issue an individual order for the audit of the respondent dealers, and the Joint Commissioner, a lower authority, was not empowered to order such an audit without proper authorization or delegation by the Commissioner. 2. Authority and Delegation of Power to Order Audits: The Revenue contended that there was a proper authorization for the audit under Section 64(4) of the Act by the Commissioner. The Commissioner had selected registered dealers based on specific parameters for conducting VAT audits by Enforcement Wing officials. However, the learned counsel for the Assessee argued that the Commissioner could not delegate the power to order an audit to any lower authority, including the Joint Commissioner. The Commissioner himself must apply his mind to the criteria enumerated under Section 64(4) of the Act for each individual dealer. 3. Compliance with Principles of Natural Justice: The court emphasized that the order under Section 64(4) of the Act must comply with the principles of natural justice, including giving notice and an opportunity of hearing to the assessee concerned. The Commissioner must record his opinion about the default by the particular assessee and the need for an audit. The court held that the order dated 16.05.2014 did not meet these requirements of law and was thus unsustainable. 4. Validity of General Orders for Audit of Multiple Dealers: The court noted that Section 64(4) does not empower the Commissioner to pass an omnibus or general order for the audit of multiple registered dealers. The order must be an individual order showing the application of mind to the facts and circumstances of each case for each period. The court found that the order dated 16.05.2014, which laid down certain criteria and left it to the Joint Commissioner to authorize officers for the audit, was wholly untenable and unsustainable. Conclusion: The court dismissed the writ appeal filed by the Revenue and quashed the order dated 16.05.2014 passed by the Commissioner. The court held that the order did not comply with the principles of natural justice and was not in accordance with the provisions of Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006. The court emphasized the need for individual orders for audits, proper authorization, and compliance with natural justice principles.
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