Revised Return – Issues

The Commissioner of Sales Tax has issued Trade Circular No. 32T of 2006 dt. 18-10-2006 extending the date for filing Audit Report prescribed u/s. 61 in Form 704 to 31st January, 2007. The date has been extended by two months from 30th November, 2006 to 31st January, 2007 and there is sigh of relief heaved by both, dealers and chartered accountants, looking to the complexities involved in filling up the said report in Form No. 704. Being the first year of the VAT Audit u/s. 61, the dealers, as well as, chartered accountants are facing doubts, dilemmas and difficulties in complying with the provision. Therefore, it would be worthwhile if the date is further extended at least up to 31st March, 2007.

The said Circular has further provided that the last date for filing Revised Return by the concerned dealer is extended up to 28th February 2007. This has created a few doubts in the minds of the dealers. It is stated that section 61 provides filing of a Revised Return if the Audit Report points out any discrepancies. The date of filing Revised Return has been extended till 28th February, 2007 only in such cases. It is possible to interpret the Circular in a manner that all other dealers need to revise their returns on or before November 2006.

The dealers can be broadly classified in two categories on the above criterion. (1) Those who are obliged to get the books of account audited u/s. 61. (2) Those who are not so required due to the Sales/Purchase turnover being less that Rs. 40 lakhs or whatever. The second category ought to have filed revised returns on or before 30th November, 2006 in all circumstances.

The second category may face two situations. (1) Returns need to be revised on finding a discrepancy on their own (2) Returns need to be revised on the advise of the VAT auditor. It is difficult to distinguish between the two situations and for the sake of convenience, the dealer may always take shelter of Audit Report to avail of extended time for filing Revised Return.

Although theoretically it is easy to say that dealer may file revised return on the discrepancies being pointed out in the Audit Report, it is normally a simultaneous process. In the course of the audit, the auditor may point out number of discrepancies and dealer may react quickly by filing Revised Return to remove those errors. The final Audit Report may consider such revised returns and there may not be ultimately any discrepancies in the Audit Report. However, the facts remains that VAT Auditor prompted the dealer to file the revised returns. It is not clear whether such a situation is considered in the said Trade Circular.

In all fairness, the Commr. of Sales Tax ought to have extended the last date of filing revised return in all circumstances without discriminating between dealers covered by section 61 and others as also between revised return as a result of VAT Audit and otherwise.

Although it is assured in the said Trade Circular that no legal action will be taken against the dealers abiding by the revised deadlines, it seems to be limited to penalties and interest. The Commr. of Sales Tax may reconsider the issue of extension of last date for filing the Audit Report in Form 704, as well as, filing of revised returns and granting extremely protection against interest as well as penalty.

Consequences of Audit Report

Most of the dealers have a common apprehension in mind that as to what will be the immediate reactions of Sales Tax Authorities on submission of the Audit Report. For example, section of the Form 704 requires the auditor to provide a list of pending declarations under C.S.T. Act and quantity the probable liability. There is an anxiety to know the exact line of action from the authorities upon reporting such liability. There are a few probable actions such as immediate notice for assessment, withholding of refund under MVAT Act, etc. It will be in the interest of the department as well as the dealers to clarify the stand on the various issues involved in the said report.

Revision/Rectification – Position

The recent Bombay High Court vide its Nagpur Bench has delivered a judgment which has made the legal position topsy–tervy as regards revision and rectification. The decision is delivered in Writ Petition No. 312 of 1989 dt. 6-6-2006. It is held that rectification order u/s. 62 has to be passed within a period of two years from the date of the original order irrespective of the fact whether Sales Tax Authority rectifies the order on its own motion or on the application made by the dealer.