No Embargo On Commercial Tax Dept. From Summoning To Furnish Records Even If Assessment Is Completed: Madras High Court

The Madras High Court has held that merely because the assessment is deemed to have been completed in both cases, it does not mean that the officers are precluded from exercising the power under Section 25 or Section 27 of the TNVAT Act, 2006.

“I see no embargo on the respondent Commercial Tax Department from summoning the respective petitioners to furnish the records. In fact, the assessment will be deemed to have been completed only if the petitioners have complied with all the requirements of Section 22(2) of the TNVAT Act, 2006. The return that was to be filed under Rule 7 of the TNVAT Rules, 2007 should be in the prescribed form and should accompany prescribed documents and proof of payment of tax,” the bench of Justice C. Saravanan observed.

Section 27 of the TNVAT Act, 2006, relates to the assessment of escaped turnover and wrong availment of input tax credit, and Section 25 prescribes the procedure to be followed in the assessment.

The petitioner/assessee submitted that the summons in Form PP under Rule 16(1) of the TNVAT Rules, 2007 applies only to a third party and not to an assessee. The petitioner had filed returns under Section 21 of the TNVAT Act, 2006, and therefore, the assessment was deemed to have been completed on October 31, 2016 for the assessment year 2015–2016 in terms of Section 22(2) of the TNVAT Act, 2006.

The petitioner contended that the power to summon documents or information from an assessee who has filed regular returns could be only in accordance with Section 22(3) of the TNVAT Act, 2006. Therefore, the summons is liable to be quashed.

The department contended that the summons had been issued in consonance with Rule 10(11) of the Tamil Nadu Value Added Tax Rules, 2007. Rule 10(11) of the Tamil Nadu Value Added Tax Rules, 2007 states that the method of selection by the Commissioner referred to in sub-section (3) of section 22 shall be based on a suitable stratified random sampling method, and such selection shall not exceed twenty percent of the cases assessed under sub-section (2) of section 22 and intimate the details of such selection to the assessing authority for detailed scrutiny of accounts. The list shall be exhibited on the notice board of the assessment circles and also on the website of the department. The assessing authority shall call for the accounts of those assessees for detailed scrutiny and pass appropriate orders.

The object of Section 22(3) of the TNVAT Act, 2006, is implemented by Rule 10 of the TNVAT Rules, 2007. As per Section 22(3) of the Act, not exceeding 20% of the total number of such assessments shall be selected by the Commissioner in such manner as may be prescribed for the purpose of detailed scrutiny regarding the correctness of the returns submitted by the dealer, and in such cases, revisions of the assessment shall be made wherever necessary.

The respondent Commercial Tax Department says that the Commissioner of Commercial Taxes has issued instructions relating to the finalization of accounts relating to dealers who have been selected for detailed scrutiny under Section 22(3) of the TNVAT Act, 2006.

The court, while dismissing the petition, held that the issuance of summons is for ascertaining and producing information. Whether the petitioners have complied with all the requirements of Section 22(2) and whether the declarations in the returns filed by the petitioners are correct or not can be ascertained only if records are summoned.

Counsel For Petitioner: R.L.Ramani

Counsel For Respondent: J.K.Jeyaselan

Case Title: M/s.V.R.Muthu & Bros. Versus State Tax Officer

Citation: 2024 LiveLaw (Mad) 225

Case No.: W.P.(MD) Nos.4359 & 4365 of 2022 and W.M.P.(MD) Nos.3685 & 3689 of 2022

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