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TN VAT - Works Contracts – Tax disputes – Appeal Process. and Consequences of Form O & RR not issued by AO

The readers may peruse the content in other article(s) on caption(s) “Taxation of works contracts under TN VAT act”, “maximization of profit element in project execution with key factor of VAT”, “TDS for Works Contract Tax Liability under TN VAT act/ Rules, written by me, by using the following links:

Taxation of Works Contracts under TN VAT act/ Rules - 3rd Revision

TDS for the works contract tax liability under TN VAT act 

Tax disputes between the dealer and the department, is discussed herein in detail, for the purpose of understanding in the hands of the person who intend to react on the erroneous and/or wrong assessment orders passed by the assessing authority.

Erroneous Assessment is an assessment that deviates from the law and creates a jurisdictional defect, and that is therefore invalid, by virtue of deficient in nature. It is an assessment in excess of fair due as defined under the relevant act/ rule, as a result of a clerical mistake on the part of the assessing authority and the dealer also in certain cases and the circumstances. The claim of erroneous assessment arises solely in circumstances where the assessment is at odds with the records of the assessing authority and accordingly reflects a clerical error/ erroneous assessment. Where a taxpayer provides information to the Assessing authority and/or the valuation predicated upon the information or where a taxpayer and the Assessor both rely upon information which each believes to be correct, subsequent discovery of mistakes in the underlying facts will not give rise to a claim of erroneous assessment. Judgments based on reliable information, reasonably relied upon by the assessing authority as to the amount, description, and nature of the taxable transaction/ issues subjected to tax, when made without malice, fraud or wilful misconduct, are neither erroneous nor illegal.

And again, even if the assessment orders passed by the assessing authority do not fall under the above erroneous assessment category, it does not meant that there is no disputes between the dealer and the assessing authority. The second reason for disputes arises owing to technical or venial breach of the provisions of the act or where the breach flows from a bona fide belief in the hands of the dealer as well as in the hands of the assessing authority.

The Process of Appeal and Revision

Standard format of the application:

Form X for appeal under section 51 and 52 and Form Y for revision under section 54 or 57. The form need to be submitted in duplicate and the original should carry the original order on which the appeal or revision is filed [Rule 14(1) & 14(7)]

Option of Appeal OR Revision: 

In the absence of provision for statutory appeal under section 51 and 52, the dealer can go for revision under section 54 or 57. Hence it is not an option of the dealer whether to choose appeal or revision, it is a process of law. In certain remote cases, where the appeal was rejected partially and accepted partially , the dealer can prefer revision on the partial order to the extent the appeal were rejected. 

Appeal Fee: Rs.100/- for appeal [Rule 14(2)]

Time limit for appeal or Revision: 30 days from the date of receipt of order under section 51(1) and 54/57.

Conditions: In case of appeal under section 51(1) the conditional payment of a sum equal to 25% of disputed tax liability plus 100% of accepted tax liability need to be deposited and evidence for the same be attached along with the application for appeal.

Resubmission time limit: Ten days from the date of receipt of the defective application returned by the appellate authority and further 10 days may be extended, if sufficient cause were exhibited by the appellant.

Hearing opportunity & Conclusion: The appellant is offered with first opportunity to be heard by the Appellate authority and the second opportunity to the departmental representative and further the departmental representative shall file written representation and copy of the same be delivered to the appellant. Based on the written representation, the appellant is entitled to represent his arguments and counters. Based on the arguments, counters, facts presented by both the parties, including natural law and justice and proper appreciation of law from time to time, the orders will be passed by the appellate authority. [Under Sec 51(3)]

Death of Appellant or Revision Petitioner: During the appeal revision process, if the appellant or revision petitioner dies the proceedings will be kept pending until the legal representative of the deceased appellant or petitioner comes in to picture and apply himself for being made party in the said proceedings [Rule 14(9)].

Consequences of Form ‘O’ and ‘RR’ not issued: On an assessment by the authority, if there is any tax dues were arrived, Form ‘O’ requires to be issued along with the orders under Rule 14(18), 14(21), 14(22) and for interest and penalty dues Form RR requires to be issued under Rule 16(5), 16-A. If the assessing authority fails to issue such forms, along with the orders, where there is a tax, interest and penalty dues, due from the dealer, the assessing authority has not only has no rights and privileges to exercise the recovery proceeding under Revenue Recovery act, but also the dealer can take it as chance to counter the fact as the assessing authority has passed the orders without application of mind, besides quoting the quality as deficient in nature.

On the other hand, it does not mean that the dealer need not go for appeal as the assessing authority has no rights and privileges to initiate recovery proceedings. If the dealer fails to go for an appeal, quoting the above reason, the assessing authority can issue a notice for rectification of assessment under section 84 on his own and pass fresh orders along with necessary forms in Form O and/or Form RR. Hence it is advisable to the dealer to go for an appeal with appellate authority or revision, in the absence of statutory appeal provisions, even if the assessing authority fails to issue Form O and/or Form RR along with the assessment orders, if the orders were not acceptable to the dealer(s). 

For any further clarifications the reader may reach the author:

P.Jagadeeswaran,
VAT Practitioner,
Laws Reward Solutions, 33,
FF, Elango Street, Chelliamman Nagar,
Athipet, Ambattur, Chennai – 600 058
Mobile no.: 9176038176
email: eswaran60@yahoo.com & eswaran1960@gmail.com

The readers are informed to note that the facts and information’s stated in this article is only the opinion of the author and assesses can use the concepts and logical used in this article in support of their cases. 

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