High Court · 2025

IN THE HIGH COURT FOR THE STATE OF TE LANGANA AT HYDERABAD THE HON'BLE SRI JUSTICE P.SAM IOSHY AND THE HON'BLE SRI JUSTICE SUDDALA CHA-. TPATHI RAO W.P.No.22989 of 2OO8 Dt.o1.L2.20.25 Betu,een: M/s R.K.'lradcrs Commercial Tzrx Office r Petitioner Re sponder-rt O R D E R: IP,:rtlrc I lon'ble Sn Jrrsiice Suddala Chatapathi Ic t) The present Writ Petition has been file<l to declare the assessment ordcr dt.26.08.2008, passed by the r:;pondenr for the period 0I .O4.2005 to 31 .12.2OO7 , levyir 1 salcs ta-r of Rs.97,180/- along with penalty of Rs.97,180 I and interest of 1n Rs.38,296/-, as illegal and arbitrary, which covers the period of 1.t audit from 01.04.2025 to 31.10.2006, by the )ommcrcial Tax officer, Balanagar Circle, Hyderabad, (for sl ort 'the CTO, Balalagar').

2. The brief facts of the casc are that, the pe t tioner is a firm dealing in trade of food-grajns and pulses zrt Tandur and is 2 registered dealer under the provisions of APVAT Act, 2005 (for short 'the Act') on the rolls of the Commercial Tax Officer, Madhapur Circle, Hyderabad ald has been filing monthly VAT returns by paying sales tax due from time to time, bv taking input tax credit on the eligible goods purchased within the State

3. Pursuant to the authorization, dt.09.10.2006, rssued by the Deputy Commissioner, Hyderabad Rural Division, the business premises of the petitioner-firm was audited b1' the CTO, Balar-ragar, on 08.1 l.2006 and upon such audit, the CTO, Balanagar, collected the differential tax of Rs.1,15,2781- on account of discrepancies in the purchases made by thc petitioner-

4. Further, under another authorization, dt. 17 .O7 .2OO7 , issued by the Deputy Commissioner (CT), Hyderabad, Rura-l Division, Hyderabad, in VAT Form No.304, the respondent-Assessing Authority visited the business premises of the petitioner-firm on

05.01.2008 ancl conducted a second audit for the period from O1.O4.2O25 to 31.12.2007, covering the period of 1st audit and issued notice, dt.31.05.2008 and the petitioner subrnitted reply on

25.06.2OO8, stating that the period up to 31.1O.2006 rvas already \ a been audited zrn c[ assessed by the CTO, Balanagar and differential ta-x has also been collected, and therefore, condu< I of audit once- again for the vcr\ samc disputed period is imperri;sible

5. It is contcndeci that without considering thi said ob-lcction, the respondent passed the impugned assessmer t order in VAT Form No.3O5, dt.26.08.2008, assessing th: period from

01.O4.2005 to 31.07.2007, and demanded additi,) ra-l ta-x, penaltv and interest, and the said amounts were also collr:ted even before servicc of the ordt--r

6. Assailing the said assessment order, dt.15.08.20O8, the prcscnt Writ Petition is filed.

7. We have heard Sri Tejprakash Toshniwal, :arned counscl for the petitioner and Sri T.Chaitanya Kiral, L: 'rned Assistant Government Plcader representing Sri Swaroop )orilla, learned Special Government Pleader for State Tax

8. Learned counsel for the petitioner would sti ,mit that, since the respondent had already passed assessnr'nt order and collected the differential tax amount for period fror r 01.04.2005 to

31.10.2006, initiation of second audit for the verl same period is 4 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 dispr.rted period, as no authorization r,vas 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$) and 3(A) read with Rule 59(2) of the VAT Rules. Further, the authorization issued by. the territorial Deputy Commissioner (CT), Hyderabad Rural Di.zision, Hyderabad does not confer jurisdiction on the Assessing Authority to proceed with assessment.

10. Learned counsel for the pet-ition er placed reliance on the judgmerrt of a Coordinate Bench of this Court in Sri Balaji Flour Mills o, Commercial Tax officerr, wherein it was helcl that an audit cannot be taken up rvithout prior author ization of the Deputy Commissioner concerned as per Rule 59(1)(7). Although under Section 2l(4), the authority prescribed can take up 1 2010 SCC Onlrnr: AP 1187 = 2O10 i,a1r'Suit t Ap\ 722 5 assessment, from a perusal of Section 43 of the \/ \T Act and Rule 59(1)(a)(ii)(b)and (d) and 59(7) of the VAT Rules, l can be inferred that until alrd unless there is a separate : uthorization to undertake assessment, an olficer authorized to nr-r lit the accounts of a VAT dealer cannot undertake assessment. 1 1. Learned counsel for the petitioner further s rbmits that the respondent had exceeded its jurisdiction and the decision of the Coordinate Bencl-r of this Court in Srl Balaii FI rur Mitts's case (supra) squarell' applcs to the facts of the p r :sent case and prayed to set aside the impugned order.

12. Per contra, learned Assistant Government ['] :ader appearing for respondent Revenue would submit that the rssertion of the learned counsel for the petitioner is not tenable ir view of the fact that the respondent had received the author L: ation from the territorial Deputy Commissioner(CT), Hyderaba<l Rural Division, Hyderabad, ar.rd that being the position, I 1e subsequent assessment order cannot be faulted. It is furthe r contended that the respondent has followed the due procedt.r e contemplated under the Act and there is no lacuna or error in 1ee order passed by the respondent and thus, prayed to dismiss the writ petition. 6 ,::,.1 1 3. 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 1.r audit rvas conducted by the CTO, Balanagar, on 08. I 1.2006, covering the period from 01.04.2005 to 31.10.2006, pLrrsuant to the authorization issued by the Deputy Commissioner, Hyderabad Rural Divisron, Flyderabad, dt.09.10.2006 and assessment order \!ras passed. Further, covering the very same period, the respondent/ assessing authority orrce 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 l"t audit was issued by collecting differential tax of 97,180/- along with penalty of Rs.97,18O/- and interest thereupon of Rs.38,296/-.

15. From a perusal of the record, it appears that pursualt 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.l,a5,27B/-- uide clreque, dt.25.lL2OO6. -'a 7 Thereupon, second audit was conducted for I e period from

01.04.2005 to 31.12.2OO7, covering the earlier reriod of audit upon the authorizat ion of the Deputy Comm i ssi : Rural Division, dt. 17 .07.2OO7. 'lhus, in the I rer, Hyderabad bsence of any authorization from the higher authority, i. e. , Co I missioner (CT), Hyderabad, the second audit conducted by the 2nd respondent/ assessing authority cannot form a 1r isis for passing the assessment order covering thc earlier period c 1 audit and more so, which culminated in the passing of the ar; essment order. The Authori zing Offrcer, who has issued auth'r ization, cannot issue autho rization for second audit and su : r authorization cannot ipso facto authorize the respondent/ asses;r ing auth ority to pass assessment orders.

16. In similar set of facts, a Coordinate Bench Sri Baloji Flour Mills's case (supra) has categ: rf this Court in -ically held that for the same period, second audit cannot be a I asis for issuing Assessment Orders as per Rule 59(1)(7) withoul rhere being any further authorization by the Commissioner (C'l') Hyderabad, to pass assessment order. In the instant case. 1 rr the disputed period from O1.O4.2O05 to 31.10.2006, first audi was conducted l I I I i I , I ! l j l I I l 8 and the assessment order was passed under due authorization of the Deputy commissioner, Balanagar circle, and differentia.l tax amount was also paid by the petitioner. In such circumstances, the sccond audit covering the same period, i.e., from Ol.O4.2OO5 to 31 .12.2OO7, was again conducted under the authorization of the very sa_rne authority, u,ho had earlier authorized the assessment based on the first audit. Such authority could not 'alid11. 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 - /.2 a) The audit offtcer should complete his uisit report on Form VAT 3O1A/ B, update Form VAT 300 and prepare Forms VAT 311 from hts workbook not later than the first off.cer day following the date of the ui.sit. b) The oJftcer should reuieu the ttork completed on the uisit and ensure that all the appropiate action has been completed. 9 c) d) e) Ang uncertainties should be resolt- dealer, and ang issues not settled' : be decided bY reference to the DC' tlrc decision 6onuetled to the VAT ar 3 1 2 utithin 1 O day s of the uisit arrc' VAT 3O1A/ B. Where on u rtder-declaralion or ttt ' been identifted, the amount of tax 't and the reosons for the under/ ouer c The nert higher authoitY s/tott assessment/ notice before the palJment foflns are issued by the cu r :d uith t.l'Le VAT t the uisit should \C(vM)/C.ro and ier on Fonn VAT 'ecorded on Form . declaratton hos ust be cctlct ated rclaration. stoted. 7 outhorize the assessment/ ouer it ofJicer. fl to k) omitted " \ \ (

18. The facts of the present case squarell lall ri'itl-rin the guidelines of 'posf aud.it action' under sub-cl''r se (e)' In the inst.ant case, the second audit was conducted :overing the 1 "t audit period and impugned assessment order \\': i passed, and it n,as not based on the ar.rthorization of a higher zr thorit.v than the Deputy Comrnissioner, Hyderabad Rural Divisic-r, and thus, in our considered vieu', in the absence of aly aull orization by the Commissioner(CT), Hyderabad, the subsequer t audit, which cuiminated into the passing of the impugned it sessment order, dt.26.O8.2OOB, is nothing but passed in excess rf jurisdiction of the respondent/ assessing authority and is i olative of Rule 10 ,f.r: i,., 59(i)(4)(ii)(b) and (d) and Rule 59(7) or rhe VAT Rules r/w Section 43 of the VAT Act.

19. In vierv of the above findings, the Writ Petition is allowed setting aside the irnprrgned order of assessment, dt.26.08.2008, passed by the respondent. No order as to costs. Consequentlv, rniscellaneous petitions, if any, pending shall stand closed That Rule Nisi has been made absolute as above t Witness THE HON'BLETHE CHIEF JUSTICE APARESH KUMAR SINGH MONDAY,THE FIRST DAY OF DECEMBER TWO THOUSAND AND TWENW FIVE SD/.AH ED ABDULLAH KHAN ISTANT REGISTRA //TRUE COPY' CTION OFFICER To, '1 . The Commercial Tax Officer Firozguda Circle Hyderabad 2. One CC to SRl. TEJPRAKASH TOSHNIWAL, Advocate [OPUC] 3. Two CCs to SPECIAL GOVERNMENT PLEADER FOR STATE TAX,High Court for the State of Telangana at Hyderabad [OUT]

4. Two CD CoPies BM BS Sr- HIGH COURT DATED:01 11212025 I ORDER WP.No.22989 of 2008 i\E Sl.' (1t S' ut ftgi$6 -! * 1 Fsr'Aifll -:.:-::r, t' I ALLOWING THE WRIT PETITION WITII CUT COSTS @ 9v >9'di '\A