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TMI Blog2016 (4) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... s been filing its returns regularly with the DT&T and also making other statutory compliances in terms of the provisions of the DVAT Act and Delhi Value Added Tax Rules 2005 ('DVAT Rules'). It is stated that during the year 2009-10, the Petitioner filed monthly returns in form DVAT 16, which returns were taken to be notice of assessment under Section 31 of the DVAT Act. 3. On 2nd August 2013, a notice for audit of the business affairs was issued to the Petitioner by the Value Added Tax Officer ('VATO') under Section 58 of the DVAT Act in form DVAT-37 asking it to produce documents indicated in the notice. In response to the above notice, the Petitioner appeared on several dates before the VATO and produced documents including records, books of accounts, invoices, details of purchases (DVAT-30 & 31) apart from the audit report including the balances sheet and chart showing the method of claiming deductions towards various expenses claimed in the return. 4. The limitation of four years for making the default assessment for the period 2009-10 expired on 31st March 2014. Till that time, no assessment notice under Section 32 of the DVAT Act was framed as the proceedings continued ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act dated 9th July 2014 were barred by limitation. In paras 7 and 8 of the judgment dated 14th May 2015 it was observed as under: "7. Apart from the fact that the proviso to section 34 (1) of the said Act has not been invoked and the 'reasons to believe' have not been recorded in writing, what is shocking is the document which has been placed at page 18 of the rejoinder affidavit filed by the petitioner which is a certified copy of the file noting dated 09.03.2014 of the Assistant Commissioner (HQ). The said noting is reproduced in its entirety herein below:- "Sub: Request for Extension of time to conduct Audit of Cases pertaining to CWG. May kindly see the list of cases allotted to this branch for audit of business affairs, for the year 2009-10 & 2010-11. These cases have been recommended for audit by the CVC as these firms were engaged in Common Wealth Games related projects. It is pertinent to mention here, that all the officers of the Branch are currently engaged in Enforcement duties in accordance with the order of the Competent Authority. Besides, the ensuing Election duties are sure to keep these officer occupied up to mid May, 2014. Since, the cases for the year 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of limitation of six years. The matter was then assigned to Mr. Brijesh Sharma, AC (Audit) for further necessary action. Thereafter the Commissioner, DT&T assigned the matter to Mr. Praveen Verma, Assistant Commissioner (VAT Audit). On 1st January 2016 Mr. Praveen Verma prepared a detailed note for the consideration of the Additional Commissioner (VAT Audit) in which he noted that the six years' period was to expire on 31st March 2016. In the note, it was inter alia observed as under: "In the case of M/s. ITD ITD CEM JV, while scrutinizing DVAT-16 (returns filed by the dealer for the year 2011-12) it has been observed that the dealer has claimed exemption/deduction towards labour, services and like charges more than the permissible limit as specified under Rule 3 of DVAT Rules, 2005. In the financial year 2009-10, the dealer has shown his taxable turnover as Rs. 88,89,16,555 whereas he has claimed deductions to the tune of Rs. 274,20,36,059. Under normal circumstances, if a dealer deductions of Rs. 274,20,36,059 then his gross turnover should be 1096,81,44,236. It appears that the dealer has concealed a substantial part of his turnover, thereby, apparently avoiding/under-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutinizing the books of account of the Petitioner. This led to a notice of default assessment of tax being issued under Section 32 of the Act on 9th July, 2014. Additionally, a notice of penalty of the same date was issued under Section 33 of the Act. Both these were challenged by the Petitioner in this Court by filing W.P.(C) 5231/2014. The challenge was on the ground that given the relevant assessment period was 1st April, 2009 to 31st March, 2010, the default assessment and penalty notices under Sections 32 and 33 of the Act issued on 9th July, 2014 were time barred. 3. By a judgment dated 14th May, 2015, this Court quashed the default assessment notices as being time barred. Para 8 of the said order reads as under: "8. We, therefore, hold that the default assessment notice dated 09.07.2014 is time barred and is quashed. The revenue may, however, take recourse to such other action as may be permissible in law." 4. It is, thereafter, that the impugned Audit Notice dated 7th January, 2016 was issued stating that an audit is required to be undertaken for the very same period, i.e., 1st April, 2009 to 31st March, 2010. 5. On the previous date, i.e., 27th January, 2016, this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 14th May, 2015 as far as the permissible course of action for the Department to take is concerned. 10. The writ petition is disposed of in the above with no order as to costs." 16. After the above order of the Court, the impugned notice dated 9th February 2016 was issued by the Assistant Commissioner (VAT Audit) to the Petitioner, which reads as under: "Assessment of tax liabilities of M/s. ITD ITD CEM JV is required to be done under Section 32 and 33 of DVAT Act for the year 2009-10 as there are reasons to believe that there has been suppression of gross turnover as shown by the dealer in DVAT returns filed by the dealer for the period concerned. Accordingly, Section 34 of DVAT Act is being invoked with the approval of Competent Authority. The assessment under Section 32 and 33 of DVAT Act read with Section 34 of DVAT Act shall be done on the basis of dealer's records, and findings thereon, available with this department. An opportunity is hereby given to the dealer to submit any additional information other than what has already been submitted by the dealer, concerning assessment of tax liabilities for the year 2009-10, which he may find relevant to be submitted, before ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as proof of the expenses incurred. In this context, Rules 3 (1) and (2) of the DVAT Rules are relevant. 22. There is a basic misconception in this approach inasmuch as there was absolutely no material for the Assistant Commissioner (VAT Audit) to have "reasons to believe" that the Petitioner had concealed "a substantial portion of its turnover". The gross turnover was being taken as Rs. 424,34,40,248 whereas the claim of deduction was in the sum of Rs. 274,20,36,059. As it was urged in the course of hearing by Mr. Narayan, the case of the DT&T is that there is no material produced by the Petitioner to justify the claim of the above entry, i.e., far above the permissible limit of 25% in terms of Rule 3 (2) of DVAT Rules. Mr. Narayan repeatedly urged before this Court that this rule must be read as forming part of the "reasons to believe" recorded by the Assistant Commissioner (VAT Audit) in the noting dated 29th January 2016 of the file and this formed the basis of issuance of the notice to the Petitioner. Mr. Narayan further submitted that since it was only a notice and not an assessment order, it would be open to the Petitioner to appear before the Assistant Commissioner (VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded make no reference to any such material. In fact, a tabular chart prepared by the DT&T placed before the Court refers to the very figures of gross turnover, works contract and sale of capital goods, as disclosed by the Petitioner in the return filed. 26. Mr Narayan referred to the audit report and urged that the said report should form the basis for the reasons to believe that exemption far in excess of what was permissible and supported by the disclosed documents had been claimed by the Petitioner. He further urged that since the note on the file referred to the audit report, it cannot be said that the reasons to believe as recorded were not based on such audit report. 27. There are several difficulties in accepting the above submission. As already noticed, the reasons to believe as recorded are about "suppression of gross turnover" and not about claim of excess exemption. Secondly, the audit report formed the basis of the previous round of litigation. It will be recalled that the notice of default assessment of tax dated 9th July, 2014 was based on the said audit report and the said notice was quashed by this Court by the order dated 14th May 2015 in W.P.(C) 5231/2014 on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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