Delhi VAT department order disturbs Delhi traders

Delhi's Trade Tax Department has recently issued 10,000 orders of recovery in a single day that led to a recovery of Rs 450 crore; under section 86, sub-section 10 of DVAT Act 2004 on account of mismatch of annexure 2A and 2B submitted by respective dealers. It was observed by the dealers that the said order was issued without giving any opportunity of personal hearing to the dealers, which is arbitrary and violation of fundamental rights of person as per Indian Constitution and also against the principal of natural justice.

On the issue of mismatch report of 2A and 2B, the Delhi High Court has given directions to VAT department and gave two weeks time to allay fears of the trader community. Filed by the Sales Tax Bar Association, petition against the VAT officer wondered how 10,000 orders can be issued in a single day by an officer. The petition claimed there was chaos in the business community when they received heavy penalty and recovery related orders.

Reacting on the illegal order issued by VAT department, Mahinder Aggarwal, president, All Delhi Computer Dealers Association (ADCTA) said, "We received a number of complaints from Nehru Place IT traders in this regard. Taking a prompt action our association members approached appropriate officers in Delhi Trade Tax Department and expressed resentments to them. It is analyzed that the said demands were issued due to fault of the department and the dealers were innocent. Therefore it is highly objectionable. We have taken serious view on this issue and forcibly pressuring higher authorities to take legal action against concerned officers."

The Commissioner of value added taxes has issued a notification stating that the Department of Trade and Taxes has made it mandatory for all monthly return filing dealers to file Annexure 2A and 2B online, before filing their DVAT and CST returns with effect from Tax period August, 2011 onwards. Subsequently, online filing of Annexure 2A and 2B was made mandatory for quarterly return filing, with effect from Tax period third quarter 2011-12 onwards. Thereafter, a 'mismatch report', showing discrepancies between the data submitted by purchasing dealers and corresponding data submitted by the respective selling dealers, was introduced on the dealer login page on the website of the department. This report also displayed the apparent tax liabilities and apparent penalty implications on account of such mismatch in data. This report was hosted on the website to educate the dealers about potential revenue implications of submitting wrong or incomplete data in Annexure 2A and 2B.

The Department framed default assessment of monthly return filing dealers for the Tax period April, 2012. Notices of default assessment and assessment of penalty were issued to approximately 5,000 dealers in this exercise.

Thereafter, several dealers revised their 2A and 2B data and as a result, the number and quantum of mismatch transactions was substantially reduced. Since this was the first assessment based on 2A-2B data mismatch, and with a view to avoid inconvenience to dealers, cases where the last date for payment of additional tax and penalty was approaching, were reviewed suo-motu by the concerned assessing authority.

Based on the analysis of the data relating to 2A and 2B mismatch and its subsequent revision, all registered dealers are advised to keep the following points in mind while filing online 2A and 2B:

1. TIN of the purchasing/selling dealers should be carefully and correctly entered. Even a single wrong digit in the TIN may result in transaction being mismatched and ITC claimed by the purchasing dealers being disallowed.

2. Complete purchase and sale data should be entered in Annexure 2A and 2B. Incomplete data will result in discrepancies between the data filed in 2A 2B and DVAT/CST returns. Such cases are likely to be taken up for default assessment shortly.

The notification also said that some dealers have filed only 2B data online, without filing 2A and DVAT/CST returns, to ensure reconciliation of data filed by their purchasing dealers. The Department perceives this to be an intentional fraud and is consolidating filing of ‘criminal' case under relevant sections of IPC.

However, the department considers it prudent to advise all such dealers to complete their 2A and Return in a weeks' time, before filing First Information Report with the Police Authorities.