Assessment and Audit – CA Final IDT Study Material

Assessment and Audit – CA Final IDT Study Material is designed strictly as per the latest syllabus and exam pattern.

Assessment and Audit – CA Final IDT Study Material

Question 1.
Kulbhushan & Sons has entered into a contract to supply two consignments of certain taxable goods. However, since it is unable to determine the value of the goods to be supplied by it, it applies for payment of tax on such goods on a provisional basis along with the required doc-uments in support of its request.

On 12.01.20XX, the Assistant Commissioner of Central Tax issues an order allowing payment of tax on provisional basis indicating the value on the basis of which the assessment is allowed on provisional basis and the amount for which the bond is to be executed and security is to be furnished.

Kulbhushan & Sons complies with the same and supplies both the consignments of goods on 25.01.20XX thereafter paying the tax on provisional basis in respect of both the consignments on 19.02.20XX.
Consequent to the final assessment order passed by the Assistant Commissioner of Central Tax on 21.03.20XX, a tax of ₹ 1,80,000 becomes due on 1st consignment whereas a tax of ₹ 4,20,000 becomes refundable on 2nd consignment.

Kulbhushan & Sons pays the tax due on 1st consignment on 09.04.20XX and applies for the refund of the tax on 2nd consignment same day. Tax was actually refunded to it on 05.06.20XX.
Determine the interest payable and receivable, if any, by Kulbhushan & Sons in the above case. [RTP, Nov. 18]
Answer:
In respect of 1st consignment

Statutory Provision

Section 60(4) of the CGST Act, 2017 :

• Where the tax liability as per the final assessment is higher than under provisional assessment i.e. tax becomes due consequent to order of final assessment
• the registered person shall be liable to pay
• interest on tax payable on supply of goods but not paid on the due date
• at the rate specified under section 50(1) [18% p.a.], from the first day after the due date of payment of tax in respect of the goods supplied under provisional assessment till the date of actual payment
• whether such amount is paid before/after the issuance of order for final assessment.

In the given Case

• The due date for payment of tax on goods cleared on 25.01.20XX under provisional assessment is 20.02.20XX.
• Kulbhushan & Sons is liable to pay following interest in respect of 1st consignment:
  = ₹ 1,80,000 × 18% × 48/365 = ₹ 4,261 (rounded off)

In respect of 2nd consignment

Statutory Provision

Section 60(5) of the CGST Act, 2017 :

• Where the tax liability as per the final assessment is less than in provisional assessment i.e. tax becomes refundable consequent to the order of final assessment
• the registered person shall be paid interest
• at the rate specified under section 56 [6% p.a.]
• from the date immediately after the expiry of 60 days from the date of receipt of application under section 54(1) till the date of refund of such tax.

In the given Case

• The refund has been made (05.06.20XX) within 60 days from the date of receipt of application of refund (09.04.20XX)
• interest is not payable to Kulbhushan & Sons on tax refunded in respect of 2nd consignment.

Question 2.
What are the provisions for “Provisional Assessment”?
Answer:
Section 60 of CGST Act, 2017 provides for “Provisional Assessment” under GST regime. The provisions are summarized as follows:

Section	Brief Description	Provision
1. 60(1)	Conditions for Provisional Assess­ment	Subject to the provisions of section 60(2) where the taxable person is unable to determine the value of goods or services or both or determine the rate of tax applicable thereto he may request the proper officer in writing giving reasons for payment of tax on a provisional basis and the proper officer shall pass an order within a period not later than 90 days from the date of receipt of such request allowing payment of tax on provisional basis at such rate or on such value as may be specified by him
2. 60(2)	Execution of Bond	The payment of tax on provisional basis may be allowed if the taxable person executes a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit binding the taxable person for payment of the difference between the amount of tax as may be finally assessed and the amount of tax provisionally assessed.
3. 60(3)	Order under Provi­sional Assessment	The proper officer shall within a period not exceeding 6 months from the date of the communication of the order issued under section 60(1) pass the final assessment order after taking into account such information as may be required for finalizing the assessment.
60(3)	Proviso	the period specified in section 60(3) may on sufficient cause being shown and for reasons to be recorded in writing be extended by The Joint Commission­er or Additional Com­missioner for a further period not exceeding 6 months and by the Commis­sioner for such further period not exceeding 4 years
4. 60(4)	Interest on Provisional Assessment	The registered person shall be liable to pay interest on any’ tax payable on the supply of goods or services or both under provisional assessment but not paid on the due date specified under section 39(7) or the rules made thereunder at the rate specified under section 50(1) from the first day after the due date of payment of tax in respect of the said supply of goods or services or both till the date of actual payment whether such amount is paid before or after the issuance of order for final assessment
5. 60(5)	Refund under Personal Assessment	Where the registered person is entitled to a refund consequent to the order of final assessment under section 60(3) subject to the provisions of section 54(8) interest shall be paid on such refund as provided in section 56.

Question 3.
What recourse may be taken by the officer in case proper explanation is not furnished for the discrepancy detected in the return filed, while conducting scrutiny under section 61 of CGST Act?
Answer:
If the taxable person does not provide a satisfactory explanation within 30 days of being informed (extendable by the officer concerned) or after accepting discrepancies, fails to take corrective action in the return for the month in which the discrepancy is accepted, the Proper Officer may take recourse to any of the following provisions:

(a) Proceed to conduct audit under section 65 of the Act;
(b) Direct the conduct of a special audit under section 66 which is to be conducted by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner; or
(c) Undertake procedures of inspection, search and seizure under section 67 of the Act; or
(d) Initiate proceeding for determination of tax and other dues under section 73 or 74 of the Act.

Question 4.
Explain the assessment of Unregistered Person as per Section 63 of CGST Act, 2017?
Answer:
Not withstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under section 29(2) but who was liable to pay tax,

The proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods,

The proper officer Issue an assessment order within a period of 5 years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates:
Provided that no such assessment order shall be passed without giving the person an opportunity of being heard.

Question 5.
Explain in what cases, assessment order passed by proper officer may be withdrawn under CGST Act, 2017? [MTP, May 2018/Nov. 19, 5 Marks]
Answer:
I. Assessment of Non-Filers of Returns [Section 62]

SECTION 62(1)
Best Judgment Assessment

• If the taxpayer does not respond to the notice issued u/s 46 (Notice to defaulters)
• the proper officer shall make
• the best judgment assessment within 5 years
• from the date specified u/s 44 (Annual Return).

The proper officer shall take into account all relevant material available/gathered.

SECTION 62(2)
Withdrawal of Assessment Order

• If the taxpayer furnished a valid return within 30 days
• from the date of service of assessment order
• no best judgment assessment to be done.

If order already passed, it shall be deemed to be withdrawn but liability will have to be paid along with interest and penalty.

II. Summary Assessment [Section 64]

To apply for withdrawal

• As per section 64(2) of the CGST Act, 2017
• a taxable person against whom a summary assessment order has been passed
• can apply for its withdrawal
• to the jurisdictional Additional/Joint Commissioner
• within 30 days of the date of receipt of the order.

If order is erroneous

• If the said officer finds the order erroneous, he can withdraw it and
• direct the proper officer to carry out determination of tax liability in terms of section 73 or 74 of the CGST Act.

The Additional/Joint Commissioner can follow a similar course of action on his own motion if he finds the summary assessment order to be erroneous.

Examiner’s Comment
The requirement of the question is to explain the cases where assessment order passed by proper officer may be withdrawn under CGST Act, 2017. Most of the examinees got confused and ended up in writing lengthy vague answers on the basis of Income-tax Act, 1961.

Question 6.
Write a brief note on Summary Assessment In certain special cases as per section 64 of the CGST Act, 2017. [May 2018, Old, 4 Marks]
Answer:
I. Assessment of Non-Filers of Returns [Section 62]

SECTION 62(1)
Best Judgment Assessment

• If the taxpayer does not respond to the notice issued u/s 46 (Notice to defaulters)
• the proper officer shall make
• the best judgment assessment within 5 years
• from the date specified u/s 44 (Annual Return).

The proper officer shall take into account all relevant material available/gathered.

SECTION 62(2)
Withdrawal of Assessment Order

• If the taxpayer furnished a valid return within 30 days
• from the date of service of assessment order
• no best judgment assessment to be done.

If order already passed, it shall be deemed to be withdrawn but liability will have to be paid along with interest and penalty.

II. Summary Assessment [Section 64]

To apply for withdrawal

• As per section 64(2) of the CGST Act, 2017
• a taxable person against whom a summary assessment order has been passed
• can apply for its withdrawal
• to the jurisdictional Additional/Joint Commissioner
• within 30 days of the date of receipt of the order.

If order is erroneous

• If the said officer finds the order erroneous, he can withdraw it and
• direct the proper officer to carry out determination of tax liability in terms of section 73 or 74 of the CGST Act.

The Additional/Joint Commissioner can follow a similar course of action on his own motion if he finds the summary assessment order to be erroneous.

Question 7.
Explain the difference between Audit by Tax Authorities under section 65 and Special Audit under section 66 of the CGST Act, 2017. [Nov. 2018, 5 Marks]
Answer:

BASIS	SECTION 65	SECTION 66
Nature of Audit	It is a departmental audit	It is a Special Audit
Conducted by	Audit under this section is conducted by officers of the department autho­rised by the Commissioner	In this section, the audit is undertak­en by a CA (Chartered Accountant) or a CMA (Cost & Management Accountant) nominated by the Com­missioner
Prior Notice	15 days notice is required	No such requirement of notice/inti­mation under Special Audit
Time for conclu­sion of the audit	Audit under this section is to be concluded within 3 months, further extension of a period of 6 months is allowed	The Special Audit is to be concluded within 90 days, further extension of 90 days is allowed

Question 8.
How many types of audit are prescribed under GST Act. Briefly explain each one of them. [Nov. 2018, Old 5 Marks]
Answer:
There are three types of audit prescribed under CGST Act, 2017 as explained below:

Section
35(5)	Audit by Chartered Accountant or a Cost Accountant	Every registered person whose turnover exceeds the pres­cribed limit, shall get his accounts audited by a Chartered Accountant or a Cost Accountant.
65	Audit by Depart­ment	The Commissioner or any officer of CGST/SGST/UTGST authorized by him by a general or specific order, may conduct audit of any registered person in the prescribed manner and frequency.
66	Special Audit	If at any stage of scrutiny, inquiry, investigations or any other proceedings, Department is of the opinion that the value has not been correctly declared or credit availed is not within the normal limits, it may order special audit by Chartered Accountant or Cost Accountant as nominated by it.

Examiner’s Comment
Some examinees got confused between departmental audit and special audit and interchanged the two concepts.

Question 9.
What are the provisions for “Special Audit”?
Answer:
Section 66 of CGST Act, 2017 provides for provisions and related matters about special audit. These are as follows:

Section	Brief Description	Provision
66(1)	Special Audit if Value not Correctly Declared/ Excess ITC Availed	If at any stage of scrutiny, inquiry, investigation or any other proceedings before him any officer not below the rank of Assistant Commissioner having regard to the nature and complexity of the case and the interest of revenue is of the opinion that the value has not been correctly declared or the credit availed is not within the normal limits he may, with the prior approval of the Commissioner, direct such registered person by a communication in writing to get his records including books of account examined and audited by a chartered accountant or a cost accountant as may be nominated by the Commissioner.
66(2)	Time Period of Audit	The Chartered Accountant or Cost Accountant so nominated shall within the period of 90 days submit a report of such audit duly signed and certified by him to the said Assistant Commissioner mentioning therein such other particulars as may be specified.
Proviso to section 66(2)		The Assistant Commissioner may on an application made to him in this behalf by the registered person or the chartered accountant or cost accountant or for any material and sufficient reason extend the said period by a further period of 90 days.
66(3)	Accounts to be Audited even already Audited	The provisions of section 66(1) shall have effect notwithstanding that the accounts of the registered person have been audited under any other provisions of this Act or any other law for the time being in force.
66(4)	Opportuni­ty of Being Heard	The registered person shall be given an opportunity of being heard in respect of any material gathered on the basis of special audit under section 66(1) which is proposed to be used in any proceedings against him under this Act or the rules made thereunder.
66(5)	Expenses to be Borne by the Depart­ment	The expenses of the examination and audit of records under section 66(1), including the remuneration of such chartered accountant or cost accountant, shall be determined and paid
		by the Commissioner and such determination shall be final.
66(5)	Initiation of action against Tax­able Person if Tax Liabil­ity Identified	Where the special audit conducted under section 66(1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized the proper officer may initiate action under section 73 or section 74.

Question 10.
Discuss Audit under GST by Tax Authorities.
Answer:
Audit Tax Authorities (Section 65 of the CGST Act, 2017):

Section	Brief Description	Provision
65(1)	Commission­er or Autho­rised Officer to conduct Audit of Registered Person	The Commissioner or any officer authorised by him by way of a general or a specific order may undertake audit of any registered person for such period at such frequency and in such manner as may be prescribed.
65(2)	Place of Audit	The officers referred to in section 65(1) may conduct audit at the place of business of the registered person or in their office
65(3)	15 Days Prior Notice for Conduct of Audit	The registered person shall be informed by way of a notice not less than 15 working days prior to the conduct of audit in such manner as may be prescribed.
65(4)	Time Period for Conclud­ing Audit – 3 Months	The audit under section 65(1) shall be completed within a period of 3 months from the date of commencement of the audit. Provided that where the Commissioner is satisfied that audit in respect of such registered person cannot be completed within 3 months, he may, for the reasons to be recorded in writing, extend the period by a further period not exceeding 6 months. Explanation. For the purposes of this sub-section, the expression “commencement of audit” shall mean the date on which the records and other documents, called for by the tax authorities, are made available by the registered person or the actual institution of audit at the place of business, whichever is later.
65(5)	Providing necessary facilities for Verification and Furnish­ing of Infor­mation	During the course of audit the authorised officer may require the registered person (i) to afford him the necessary facility to verify the books of account or other documents as he may require; (ii) to furnish such information as he may require and render assistance for timely completion of the audit
65(6)	Findings of Audit to be informed to Taxable Per­son within 30 days if Audit	On conclusion of audit the proper officer shall, within 30 days inform the registered person whose records are audited about the findings, his rights and obligations and the reasons for such Endings
65(7)	Tax Liabili­ty Identified – Initiation of Action against Taxable Per­son	Where the audit conducted under section 65(1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized the proper officer may initiate action under section 73 or section 74.