Mind Your Business First - Then of Dealers

Section 22 begins with the words "with a view to promoting compliance with the provisions of this Act, the Commissioner may arrange audit of business…………". Looking to the intention of the Department to promote compliance, the business community and Professional fraternity should have welcomed business audit by the experts from the Department. But none of them is happy with it for many reasons.

One of the reasons is, the list of documents expected from the dealers. This list contains the copies of documents which the dealers have already furnished along with TIN Application or with Application for Registration or with Form 704. Instead of asking the same again from the dealer, why the audit team do not carry the copy of their own records, while going to the place of dealer. In fact the Commissioner should make it mandatory for the audit team to study all the returns, Balance Sheet and Form 704 filed by the dealer before fixing an appointment with the dealer for the business audit. But the hitch lies here only. No one wants to do the home work before the case is selected for business audit. Instead, it is easy for the audit team to send the pre-printed list of documents to a dealer.

The grievance on our part is not merely for labour a dealer and we are required to put in for preparation of all the aforesaid copies of documents, but it is for not following one of the basic criteria for business audit which is examining the returns filed by the dealer and ascertain-ment of discrepancy, if any. When the base for business audit is the examination of returns we fail to understand, why the audit officer directs the dealer to furnish the copies of returns filed. This is because, who cares? We do understand the difficulties of the Department regarding Administration, Automation etc. but this does not mean that we should allow them to commence business audit without the examination of returns which are available with the Return Branch.

This is happening because of the mess in the Department in the form of no co-ordination between its various Branches; i.e., Return Branch, Business Audit Branch and the Refund Audit Branch. I have not mentioned here the Assessment and Enforcement Branch because the Department is making a claim, that under VAT the assessment would be only in exceptional cases.

Section 22 has fixed the criteria to be applied by the Department for selection of cases for business audit. If this criteria is not followed by the Audit Officer, the so called object of promoting compliance cannot be fulfilled. One may look at "Taxpayer’s Guide on VAT" circulated by the Department for the benefit of Dealers. Part 7 of this Guide explains the objective, selection criteria and the procedure to be followed by the audit team. Our strong submission is that the audit team is not following the Guidelines published by its own Department.

One more criteria is, where the Department has reason to believe that the return may not be correct or a detail scrutiny is necessary. May we ask the Department to come out openly whether they doubt the genuineness of Audit Report under section 61 filed by the dealer. If the answer to this is negative, then the notices issued for Business Audit must be withdrawn in cases where Audit Reports under section 61 are filed. Our information is that the cases selected for Business Audit are mostly in cases where Audit Reports under section 61 have been filed.

The Taxpayer’s Guide referred earlier clearly states that "if the audit shows that the returns filed do not reflect the true picture of the business, the auditor will discuss the matter with the dealer and give guidance to prevent recurrence and explains what action will follow. If any additional tax is due, the auditor will issue a notice explaining the additional demand. If the dealer accepts the additional demand shown in the notice, he should file revised return along with payment of tax." However our experience is that the Audit Officer is not issuing notice in writing explaining the reasons for additional demand and calculation thereof.

Even under presumption of issuance of such notice, we have our own doubts about the satisfaction of the Audit Officer towards the compliance because even if the dealer accepts the demand raised in such notice and pays tax along with the revised return, there is no assurance that in case of such period, neither assessment nor business audit again would take place. In fact the provision under section 22 should be such that no assessment would take place in case of the period covered by the revised return filed by the dealer as a result of audit. Unfortunately then Commissioner Mr. B.C. Khatua repeatedly stated that the business audit can be conducted by us for any number of times we require. This is sorry state of affair on the part of Department.

What we expect is the avoidance of duplication of work for Departmental authorities as well as to Dealers. Officials are doing Refund audits, Follow-up visits, Business audits and what not. But there is no certificate from the Officer regarding the sufficient compliance on the part of such dealers. Unless this is done the dealer will not come to know whether the Officer is satisfied with the records maintained by him or not. Therefore our suggestion is, better you make assessments whenever you pay visits to the place of business of the dealer and only then the objective of promoting compliance by the dealers can be well achieved.

If there is no improvement in the attitude of the Visiting Team, we will be forced to say, mind your business first before advising the dealers for compliance, under the name of Business Audit. We have already moved to the Commissioner Mr. Sanjay Bhatia by way of representation who according to us will reasonably consider these aspects.