Audit under Section 65 of CGST Act, 2017 Cannot be Conducted, if Business of the Taxpayer is Closed : 2023-ProIndiaClub(HC) 12
Recently in case of Tvl.Raja Stores vs. The Assistant Commissioner (ST) Madurai [W.P.(MD).No.15291 of 2023 order dated 11-08-2023] it was held by The Madurai Bench of Madras High Court that Section 65 of the CGST Act, 2017 allows audits for registered persons only and initiating an audit after years of non-audit wasn’t acceptable. Additionally, the court ruled that tax authorities retained the ability to pursue assessment proceedings under Sections 73 and 74.
Summary of the case is given hereunder:
- The petitioner, a registered taxpayer named Tvl.Raja Stores, sought to close its business, and authorities approved the closure effective from March 31, 2023.
- After closure, the petitioner failed to pay collected taxes, leading the respondent (Assistant Commissioner) to issue a show cause notice on May 19, 2023, to conduct an audit.
- The petitioner argued that since their registration was cancelled, the audit wasn’t applicable to them, citing Section 65 of the CGST Act. They contended that when the section specifically states ‘any registered person,’ then it ought to be construed as existence concern, and the unregistered person is exempted from the purview of the said section 65.
- On perusing Section 65, Hon’ble court ruled that the audit can be conducted to the said registered persons “for such period”, “for such frequency” and “in such manner”. When a Section provides for periodical audit, the respondent having failed to conduct audit for all these years, suddenly cannot wake up and conduct an audit. However, this will not preclude the respondent from initiating assessment proceedings for the said concern under Sections 73 and 74.
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