Relevant extract of Section 67-(1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-
(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or
Relevant extract of Section 71-(1) Any officer ……shall have access to any place of business of a registered person to inspect …..for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.
Although the statute has been worded in a ambiguous manner, but on the basis of bare reading of the above provisions, it can be observed that Section 67 puts onerous condition rather than Section 71 for being exercised. Following are the conditions-
Reason-1-Where in case of Section 67, there has to be a reason to believe but in case of Section 71, there is no requirement for having any reason to believe.
Reason-2-Whereas in Section 67(1), the “reason to believe” shall lead to the indication of
a) suppression of any transaction relating to supply of goods or services or both or stock of goods in hand, or
b) claiming of input tax credit in excess of entitlement under the Act, or
c) indulging in contravention of any of the provisions of the Act or the rules made thereunder to evade tax under the Act.
However in Section 71, there is no such requirement and only condition is “for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.”.
Reason-3-Power granted in Section 71 is qualified by the words “for the purposes of carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.”. This indicates that access to business premises can be done once any audit, scrutiny, verification is already initiated. The general words “checks as may be necessary” following the principle of “ejusdem generis” shall take words from the preceding words and cannot be interpreted in any open ended manner.
Reason-4-For a permission under Section 67, form under INS-01 and entire process has been provided and any lapse on that invalidates the search and in case of Section 71, there is no such procedure laid down as it pre-supposes by the use of words “for the purposes of carrying out any audit, scrutiny, verification and checks” that there are pending enquiry/proceedings in which the authority has the Jurisdiction over the taxpayer and only permission required is for the access to the business premises and there is no requirement t assume fresh jurisdiction over the taxpayer.
Therefore, on a harmonious reading of the statute, there cannot be two provisions applicable for same visit wherein under Section 67(1), there are conditions and restrictions and another in Section 71 , which does not have any. If the interchangeable use of these provisions is allowed, then it would render Section 67(1) obsolete as who would like to follow such onerous conditions. Thus, a visit u/s 71 instead of inspection U/Sec 67(1) cannot be a source to assume jurisdiction over a taxpayer and commence suo-motu enquiry by the Anti-Evasion.
Share this content:
