Point of Law: authorization to audit under Section 43 read with Rule 59(1)(7) by itself does not enable audit officer to undertake assessment, we set aside all the assessment orders and consequential orders, if any under Section 53 of the VAT Act, in all the writ petitions;

ORDER :

UDPR, J.

1. The petitioner seeks writ of certiorari or any other writ or order directing quashing of the order of the 1st respondent dated 15.07.2018 passed in A.O.No.121443 for the tax period 2015-16, 2016-17 and 2017-18 (upto June, 2017) as illegal, arbitrary, without proper authorization and without proper opportunity to the petitioner and pass such other orders as the Court deems fit.

2. The petitioner runs stone crusher unit at S.Kota Road, Jami Village, Vizianagaram District. It is a turnover tax dealer (ToT) under the provisions of the AP VAT Act, 2005.

3. The 1st respondent, basing on the authorization for audit and assessment issued by the 2nd respondent on 09.03.2018, undertook assessment by issuing show cause notice to assess the turnover of the petitioner basing on the electricity consumption. The petitioner did not receive the show cause notice prior to the assessment. Hence, the petitioner was not aware of the best judgment assessment. It was only when a demand notice was issued for payment of tax that the petitioner realized that there was a demand for tax of Rs.3,95,733/-and equal amount towards penalty.

4. The petitioner applied for certified copy on 28.11.2020 and the 1st respondent supplied the same on 08.01.2021 which revealed that tax liability of Rs.3,95,733/-was on an estimated turnover of Rs.75,14,667/-basing on the power consumption for the tax period 2015-16, 2016-17 and 2017-18. The alleged show cause notice dated 25.04.2018 proposing to levy tax or the alleged notice dated 16.05.2018 fixing personal hearing were not at all served on the petitioner and hence, the petitioner had no opportunity to file objections or to appear for personal hearing.

5. On verification of the assessment order, the petitioner found that the assessment was without authorization. In the assessment order, it was claimed by the 1st respondent that he had obtained common authorization for audit and assessment from the 2ndrespondent on 09.03.2018 and thereafter initiated assessment. The authorization is defective for more than one reasons i.e., it was not issued by appropriate authority and it was issued both for audit and assessment which is not correct in the eye of law. Therefore, the assessment order is vitiated.

Hence the writ petition.

6. Heard Sri S. Dwarakanath, learned counsel, representing Sri K.V.J.L.N.Sastry, learned counsel for the petitioner and learned Government Pleader for Commercial Taxes.

7. On two main grounds, learned counsel for the petitioner questioned the validity of the impugned order passed by the 1st respondent. Firstly, it is contended that as per Rule 59(7) of the AP VAT Rules, 2005, in respect of a ToT dealer, the best judgment assessment can be made by the Deputy Commercial Tax Officer (DCTO) of the circle concerned as authorized by the Commercial Tax Officer of the circle concerned for the dealers in the circle concerned. However, in the present case, the assessment is done by the Intelligence Officer who is higher in rank and not competent to assess the petitioner. Therefore, the assessment order is bad at law for improper authorization.

8. Secondly and alternatively, it is argued that assuming that the 1st respondent is competent to pass assessment order treating the petitioner is a VAT dealer, even then the assessment is vitiated for the reason that there cannot be a common authorization for audit and assessment as issued by the 2nd respondent. There should be one authorization for audit and a separate authorization for assessment. Even if both authorizations are couched in one order, the Auditing authority shall conduct the audit first and if he finds any under-declaration of the turnover and other mischiefs, he should prepare a report and submit to the higher authority who issued authorization and it is only after recording the satisfaction by such higher authority that in view of the de