Overview-Section 61 Scrutiny of Returns

Scrutiny of Returns

√ As per section-61 , 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.

√ In legal parlance, it is considered to be a pre-adjudication process.

√  The process of adjudication is provided in Sections 73 to 75 of the Act.

Steps undertaken in Section-61, Scrutiny of returns

> Proper Officer issues notice in the FORM GST ASMT-10, informing of such discrepancies and seeking his explanation.

>  The registered person may accept the discrepancy mentioned in the notice issued and pay the tax, interest and any other amount arising from such discrepancy and inform the same or furnish an explanation for the discrepancy in FORM GST ASMT- 11 to the proper officer.

>  Where the explanation furnished by the registered person or the information submitted found to be acceptable, the proper officer shall inform him accordingly in FORM GST ASMT-12.

What resolutions are available…?

>  On issuance of notice to taxable person, Discrepancy must conclude within a maximum period of 30 days from the date of service of the notice and be resolved in one of the three ways listed in the section i.e.

1) Admission and rectification or explanation

2) Non Admission

3) Admission but In action by taxpayer.

Important point to be noted is.

In case of Inaction or Non Admission by Taxable Person, Proper Officer can not issue ‘order of demand’ out of section 61 itself. Although, scrutiny can give rise to evoking following provisions:-

  • Initiate departmental audit as per section 65 of the Act; or
  • Initiate Special Audit as per section 66 of the Act;
  • Initiate inspection, search and seizure as per section 67 of the Act;
  • Issue show cause notice u/s 73 & 74 of the CGST Act.

Can officer call for Books & Records?

  • Proper Officer if wants to call for books & records of taxpayer.
  • He has to invoke sections 65 or 66 to audit the books of taxpayer.
  • Most important aspect is that Proper Officer CANNOT carry out any assessment under section 61.

Essential ingredients for Scrutiny of returns under section-61

♦ Returns,

  • Returns–identify which is a „return‟ in respect of which scrutiny is being carried out. Return is defined in section 2(97) which does not refer to any specific section but states „any‟ return „prescribed or otherwise required to be furnished‟. Any of the “GSTR” series of documents (and replacements like ANX-1/2 and RET-1/2/3) will be a „return‟ to which scrutiny provisions will apply.

♦ Proper Officer

  • Proper Officer–only the Proper Officer under whose jurisdiction taxpayer is registered and filing returns is authorized to scrutinize returns. Any cross-empowered officer may collect or access the returns but is not vested with authority under section 61 to scrutinize.

♦ Discrepancy

Discrepancy–is an inconsistency or inaccuracy which is a very important requirement to invoke section 61 that the Proper Officer must „discover‟ from within the returns itself. Section 61 does not permit investigation into new things not emerging from the returns as there other provisions with checks and balances to undertaken investigation

Meaning of Discrepancies from within returns..?

  • A very important essence for issuing notice under section-61 is discrepancy should be found from within the returns, and not from external source of additional information

Some Examples for Discrepancies from within the returns.

  • GSTR 2A showing inward supplies at 3% rate of tax but nooutward supplies appearing at 3% rate of tax.
  • Net Tax‟ payable being “negative” through out the year indicative of missing value addition or possibly investments in capital goods when inverted rate structure known not to exist.
  • Taxpayer involved in non-seasonal trading business filed ‘nil’ returns for 6 months of the year.
  • Turnover in GSTR 1 and GSTR 3B mismatch or credit in GSTR 2A and GSTR 3B mismatch.
  • Regular amendments in outward supplies but no payment found towards “interest‟

Some Examples for Discrepancies from external information which is not available from within the returns

  • Whether turnover reported as “exports” has been billed in foreign currency or not.
  • EWB known to be generated for inward supply of motor vehicles, but no credit found to be disallowed or reversed as ineligible.
  • Balance sheet showing “other service income” but no turnover reported under chapter 99.
  • Taxpayer reported to have received notices from creditors under IBC, 2016 but no credit reversals reported under rule 37.
  • ‘Nil’ EWB generated throughout the year.

These instances do not represent to be based on any circulars or court decisions but prepared based on understanding of underlying issues for various contributors.

Author Bio

Qualification: CA in Practice
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Location: DELHI, Delhi, India
Member Since: 01 Jan 2020 | Total Posts: 5
Author is a Chartered Accountant by qualification having past experience of working with Big 4 Audit firm currently practicing in Delhi as a Partner in SASG & Co. He is a Commerce Graduate from Delhi University Also have completed Cerification in Goods & Service Tax from ICAI, Certificatio View Full Profile

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April 2021