Scrutiny of returns

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Scrutiny of returns 2017-04-13T23:58:50+00:00
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  • Ashish BadalaCA Ashish Badala
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    (1) The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto.

    (2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.

    (3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74.

    Priya MadrechaPriya Madrecha
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    61.1  Analysis
    Section 61 deals with a discretionary power to a Proper Officer to scrutinize returns filed by registered persons to verify the correctness of the return.. It is a pre-adjudication process. The process of adjudication is Provided in Sections 73 to 75 of the Act. During such scrutiny, discrepancies if any noticed has to be communicated vide notice to the registered person in FORM GST ASMT-10, and also seeking his explanation within such time set out in the notice, not exceeding 15 days from the date of service of the notice. The notice should also contain the details as to the quantified amount of tax, interest and any other amount payable in relation to such discrepancy. This Section also authorizes registered person to receive and respond in FORM GST ASMT-11 wherein either the explanations called for by the proper officer is furnished or in case where the discrepancy is accepted, pay the tax, interest and any other amount and inform the same in that.
    Where the explanations offered are satisfactory, this fact shall be informed to the registered person and no further action is to be taken in this regard.
    In case, satisfactory explanation is not obtained within 30 days of being informed or such further period as permitted by proper officer or after accepting discrepancies, registered person fails to take corrective measures, in his return for the month in which the discrepancy is accepted by him, the proper officer, may, take recourse after issuance of notice to any of the following provisions:
    •    Conduct audit at the place of business of registered person in a manner Provided in Section 65 of the Act; or
    •    Direct such registered person by notice in writing to get his records including books of accounts examined and audited by a Chartered Accountant or Cost Accountant under Section 66 of the Act; or
    •    Undertake procedures of inspection, search and seizure under Section 67 of the Act  •     And proceed to determine dues under sections 73 & 74 of the CGST Act.
    The first stage in return scrutiny denotes a prima facie scrutiny, in order to ascertain whether the information furnished by the assessee in returns is prima facie valid and not inadequate or internally inconsistent. The second stage appears to be a detailed assessment calling for records and determination of tax liability under sections 73 to 75.
    In doing so, the proper officer, is also entitled to exercise his power under section 67 of the Act, which deals with power of inspection, search and seizure.
    From the language employed in section 67, it appears that, these powers are required to be exercised not in routine manner but only under circumstances when there is reasonable belief regarding probable suppression or intention to evade tax.
    It’s important to note that, section 61(3) empathetically provides that, in case the explanation given by the tax payer in response to discrepancies informed by the proper officer, is found acceptable, the registered person shall be informed accordingly in FORM GST ASMT-12 and no further action shall be taken in this regard.
    61.2  Comparison with equivalent provisions in other laws
    The provisions as to scrutiny of returns are presently also contained in Service Tax / Central Excise and State VAT laws. For example, Rule 12 of Central Excise Rules. Rule 12(3) provides that, the ‘Proper Officer’ may on the basis of information contained in the return filed by the assessee under rule 12(1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee on the goods removed, in the manner to be prescribed by the Board. CBEC has issued guidelines for detailed scrutiny of Central Excise Returns vide Circular No. 1004/11/2015-CX, dated 21-72015.
    61.3  Related Provisions
    Section / Rule / Form      Description
    Section 65     Audit by tax authorities
    Section 73 &74     Determination of tax not paid, short paid, erroneously refunded
    Section 67     Power of inspection, search and seizure
    61.4 FAQ
    Q1. Describe the recourse that may be taken by the officer in case proper explanation is not furnished for the discrepancy in the return.
    Ans. In case, satisfactory explanation is not obtained or after accepting discrepancies, registered person fails to take corrective measures, in his return for the month in which the discrepancy is accepted by him, the Proper Officer may take recourse to any of the following provisions:
    (a)    Conduct audit at the place of business of registered person in a manner Provided in Section 65 of the Act, or;
    (b)    Direct such registered person by notice in writing to provide his records including audited books of account examined and audited by a Chartered Accountant or Cost Accountant under Section 66 of the Act or ;
    (c)    Undertake procedures of inspection, search and seizure under Section 67 of the Act; and
    (d)    Issue notice under Sections 73 to 75 of the Act.
    Q2.     What does Section 61 deal with?
    Ans. Section 61 deals with scrutiny of returns filed by registered persons to verify the correctness of such returns.
    Q3. What is the proper officer required to do, if the information obtained from assessee u/s 61is found satisfactory?
    Ans. In case the explanation is found acceptable, the registered person shall be informed accordingly in Form GST ASMT-12 and no further action shall be taken in this regard.
    61.5 MCQ
    Q1. Where the tax authorities notice a discrepancy in the details during the scrutiny of returns, the registered person:
    (a)    would be liable for interest if he is unable to prove that the discrepancy did not arise on his account and it was a fault of another person
    (b)    is required to provide satisfactory/ acceptable explanation for the same within 30 days or any extended timelines as may be permitted
    (c)    must prepare documents to cover up the discrepancy.
    (d)    Both (a) and (b)
    Ans. (b) is required to provide satisfactory/ acceptable explanation for the same within 30 days or any extended timelines as may be permitted
    Q2. If the information obtained from taxable person is not found satisfactory by the proper officer, he can pass assessment order u/s 61 raising demand of disputed tax demand.
    (a)    True
    (b)    False
    Ans. (b) False
    Q3.     What is the time limit after which action under section 61 cannot be taken?
    (a)    30 days from filing of return or such further period as may be decided by proper officer.
    (b)    No time Limit
    (c)    Time limit mentioned in Section 73 or 75 of the Act.
    Ans. (c) Time limit mentioned in Section 73 or 75 of the Act.
    Q.4  What’s the time limit, within which the registered person should take corrective measures after accepting the discrepancies communicated to him by proper officer?
    (a)    reasonable time
    (b)    30 days from the date of communication of discrepancy.
    (c)    30 days from date of acceptance of the discrepancy
    (d)    date of filing of return for the month in which the discrepancy is accepted Ans: (d) date of filing of return for the month in which the discrepancy is accepted.

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