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2025 DIGILAW 1670 (TS)

R. K. Traders v. Commercial Tax Officer

2025-12-01

P.SAM KOSHY, SUDDALA CHALAPATHI RAO

body2025
ORDER: Suddala Chalapathi Rao, J. The present Writ Petition has been filed to declare the assessment order dt.26.08.2008, passed by the respondent for the period 01.04.2005 to 31.12.2007, in levying sales tax of Rs.97,180/- along with penalty of Rs.97,180/- and interest of Rs.38,296/-, as illegal and arbitrary, which covers the period of 1st audit from 01.04.2025 to 31.10.2006, by the Commercial Tax officer, Balanagar Circle, Hyderabad, (for short ‘the CTO, Balanagar’). 2. The brief facts of the case are that, the petitioner is a firm dealing in trade of food-grains and pulses at Tandur and is registered dealer under the provisions of APVAT Act, 2005 (for short ‘the Act’) on the rolls of the Commercial Tax Officer, Madhapur Circle, Hyderabad and has been filing monthly VAT returns by paying sales tax due from time to time, by taking input tax credit on the eligible goods purchased within the State. 3. Pursuant to the authorization, dt.09.10.2006, issued by the Deputy Commissioner, Hyderabad Rural Division, the business premises of the petitioner-firm was audited by the CTO, Balanagar, on 08.11.2006 and upon such audit, the CTO, Balanagar, collected the differential tax of Rs.1,45,278/- on account of discrepancies in the purchases made by the petitioner-firm. 4. Further, under another authorization, dt.17.07.2007, issued by the Deputy Commissioner (CT), Hyderabad, Rural Division, Hyderabad, in VAT Form No.304, the respondent-Assessing Authority visited the business premises of the petitioner-firm on 05.01.2008 and conducted a second audit for the period from 01.04.2025 to 31.12.2007, covering the period of 1 st audit and issued notice, dt.31.05.2008 and the petitioner submitted reply on 25.06.2008, stating that the period up to 31.10.2006 was already been audited and assessed by the CTO, Balanagar and differential tax has also been collected, and therefore, conduct of audit once-again for the very same disputed period is impermissible. 5. It is contended that without considering the said objection, the respondent passed the impugned assessment order in VAT Form No.305, dt.26.08.2008, assessing the period from 01.04.2005 to 31.07.2007, and demanded additional tax, penalty and interest, and the said amounts were also collected even before service of the order. 6. Assailing the said assessment order, dt.26.08.2008, the present Writ Petition is filed. 7. We have heard Sri Tejprakash Toshniwal, learned counsel for the petitioner and Sri T.Chaitanya Kiran, learned Assistant Government Pleader representing Sri Swaroop Oorilla, learned Special Government Pleader for State Tax. 8. 6. Assailing the said assessment order, dt.26.08.2008, the present Writ Petition is filed. 7. We have heard Sri Tejprakash Toshniwal, learned counsel for the petitioner and Sri T.Chaitanya Kiran, learned Assistant Government Pleader representing Sri Swaroop Oorilla, learned Special Government Pleader for State Tax. 8. Learned counsel for the petitioner would submit that, since the respondent had already passed assessment order and collected the differential tax amount for period from 01.04.2005 to 31.10.2006, initiation of second audit for the very same period is per se in excess of the jurisdiction and thus the Assessment Order, dt.26.08.2008 is illegal, arbitrary and untenable, and liable to be set aside. 9. It is further contended by the learned counsel for the petitioner that the assessing authority has no authority to conduct a second audit for the disputed period, as no authorization was issued by the Commissioner of Commercial Taxes, who is the competent authority to empower an officer to undertake such audit in terms of Sections 2(4) and 3(A) read with Rule 59(2) of the VAT Rules. Further, the authorization issued by the territorial Deputy Commissioner (CT), Hyderabad Rural Division, Hyderabad does not confer jurisdiction on the Assessing Authority to proceed with assessment. 10. Learned counsel for the petitioner placed reliance on the judgment of a Coordinate Bench of this Court in Sri Balaji Flour Mills v. Commercial Tax officer , 2010 SCC Online AP 1187 = 2010 LawSuit (AP) 722 wherein it was held that an audit cannot be taken up without prior authorization of the Deputy Commissioner concerned as per Rule 59(1)(7). Although under Section 21(4), the authority prescribed can take up assessment, from a perusal of Section 43 of the VAT Act and Rule 59(1)(4)(ii)(b)and (d) and 59(7) of the VAT Rules, it can be inferred that until and unless there is a separate authorization to undertake assessment, an officer authorized to audit the accounts of a VAT dealer cannot undertake assessment. 11. Learned counsel for the petitioner further submits that the respondent had exceeded its jurisdiction and the decision of the Coordinate Bench of this Court in Sri Balaji Flour Mills ’s case (supra) squarely applies to the facts of the present case and prayed to set aside the impugned order. 12. 11. Learned counsel for the petitioner further submits that the respondent had exceeded its jurisdiction and the decision of the Coordinate Bench of this Court in Sri Balaji Flour Mills ’s case (supra) squarely applies to the facts of the present case and prayed to set aside the impugned order. 12. Per contra, learned Assistant Government Pleader appearing for respondent-Revenue would submit that the assertion of the learned counsel for the petitioner is not tenable in view of the fact that the respondent had received the authorization from the territorial Deputy Commissioner(CT), Hyderabad Rural Division, Hyderabad, and that being the position, the subsequent assessment order cannot be faulted. It is further contended that the respondent has followed the due procedure contemplated under the Act and there is no lacuna or error in the order passed by the respondent and thus, prayed to dismiss the writ petition. 13. We have given earnest consideration to the submissions made by the learned counsel appearing on either side and perused the material available on record. 14. The main grievance of the petitioner is that the 1st audit was conducted by the CTO, Balanagar, on 08.11.2006, covering the period from 01.04.2005 to 31.10.2006, pursuant to the authorization issued by the Deputy Commissioner, Hyderabad Rural Division, Hyderabad, dt.09.10.2006 and assessment order was passed. Further, covering the very same period, the respondent/assessing authority once again conducted audit by inspecting the business premises of the petitioner on 05.01.2008, and passed the impugned assessment order, dt.26.08.2008, covering the period of 1 st audit was issued by collecting differential tax of 97,180/- along with penalty of Rs.97,180/- and interest thereupon of Rs.38,296/-. 15. From a perusal of the record, it appears that pursuant to the authorization of Deputy Commissioner, Hyderabad, dt.09.10.2006, the assessment order was passed for the period from 01.04.2005 to 31.10.2006 and the petitioner had paid disputed tax of Rs.1,45,278/- vide cheque, dt.25.11.2006. Thereupon, second audit was conducted for the period from 01.04.2005 to 31.12.2007, covering the earlier period of audit upon the authorization of the Deputy Commissioner, Hyderabad Rural Division, dt.17.07.2007. Thus, in the absence of any authorization from the higher authority, i.e., Commissioner (CT), Hyderabad, the second audit conducted by the 2 nd respondent/assessing authority cannot form a basis for passing the assessment order covering the earlier period of audit and more so, which culminated in the passing of the assessment order. Thus, in the absence of any authorization from the higher authority, i.e., Commissioner (CT), Hyderabad, the second audit conducted by the 2 nd respondent/assessing authority cannot form a basis for passing the assessment order covering the earlier period of audit and more so, which culminated in the passing of the assessment order. The Authorizing Officer, who has issued authorization, cannot issue authorization for second audit and such authorization cannot ipso facto authorize the respondent/assessing authority to pass assessment orders. 16. In similar set of facts, a Coordinate Bench of this Court in Sri Balaji Flour Mills ’s case (supra) has categorically held that for the same period, second audit cannot be a basis for issuing Assessment Orders as per Rule 59(1)(7) without there being any further authorization by the Commissioner (CT), Hyderabad, to pass assessment order. In the instant case, for the disputed period from 01.04.2005 to 31.10.2006, first audit was conducted and the assessment order was passed under due authorization of the Deputy Commissioner, Balanagar Circle, and differential tax amount was also paid by the petitioner. In such circumstances, the second audit covering the same period, i.e., from 01.04.2005 to 31.12.2007, was again conducted under the authorization of the very same authority, who had earlier authorized the assessment based on the first audit. Such authority could not have validly authorized a fresh assessment order based on the second audit for the same period. Therefore, in our considered view, the impugned assessment order is nothing but passed in excess of jurisdiction. 17. For better appreciation of the instant case, the guidelines in 7.2 of Chapter VII (Post Audit Action) in Audit Manual are extracted hereunder: “ Action by Audit Officer - 7.2 a) The audit officer should complete his visit report on Form VAT 301A/B, update Form VAT 300 and prepare Forms VAT 311 from his workbook not later than the first officer day following the date of the visit. b) The officer should review the work completed on the visit and ensure that all the appropriate action has been completed. b) The officer should review the work completed on the visit and ensure that all the appropriate action has been completed. c) Any uncertainties should be resolved with the VAT dealer, and any issues not settled on the visit should be decided by reference to the DC/AC(VM)/CTO and the decision conveyed to the VAT dealer on Form VAT 312 within 10 days of the visit and recorded on Form VAT 301A/B. d) Where an under-declaration or over-declaration has been identified, the amount of tax must be calculated and the reasons for the under/over declaration stated. e) The next higher authority should authorize the assessment/notice before the assessment/over payment forms are issued by the audit officer. f) to k) omitted.” 18. The facts of the present case squarely fall within the guidelines of ‘post audit action’ under sub-clause (e). In the instant case, the second audit was conducted covering the 1st audit period and impugned assessment order was passed, and it was not based on the authorization of a higher authority than the Deputy Commissioner, Hyderabad Rural Division, and thus, in our considered view, in the absence of any authorization by the Commissioner(CT), Hyderabad, the subsequent audit, which culminated into the passing of the impugned assessment order, dt.26.08.2008, is nothing but passed in excess of jurisdiction of the respondent/assessing authority and is violative of Rule 59(i)(4)(ii)(b) and (d) and Rule 59(7) of the VAT Rules r/w Section 43 of the VAT Act. 19. In view of the above findings, the Writ Petition is allowed setting aside the impugned order of assessment, dt.26.08.2008, passed by the respondent. No order as to costs. Consequently, miscellaneous petitions, if any, pending shall stand closed.