Ch 27 - Assessment and Audit | GST Saral by CA Dhruv Aggarwal PDF Download

 Page 1


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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 27 - Assessment and Audi t 
 
 
 
 
 
 
 
 
 
27.1 Meaning of 'assessment' 
CHAPTER 27 
 
Assessment  and Audit 
 
Assessment means determining the tax liability. 
 
'Assess' in a taxing statute means the computation of the income of assessee, the determination of tax payable 
by him, and the procedure for co lecting or recovering the tax - Bhopal Sugar Industries v. State of MP - 
AIR 1979 SC 537 = (1979) 3 SCC 792- similar view in J K Iron v. ITO AIR 1967 A l 248 = 65 ITR 386 
(A l HC). 
The word 'assessment' can comprehend the whole procedure for ascertaining and imposing liability upon the 
tax payer - Kalavati Devi v. CIT AIR 1968 SC 162 = 66 ITR 680 (SC). 
"Assessment" means determination of tax liability under this Act and includes self-assessment, re-assessment, 
provisional assessment, summary assessment and best judgment assessment - section 2(11) of CGST Act. 
27.1-1 Self-Assessment in GST 
 
Every registered taxable person shall self assess the taxes payable under this Act and furnish a return for each 
tax period as specified under section 39 of CGST Act- section 59 of CGST Act. 
27.2 Provisional Assessment 
 
Where the taxable person is unable to determine the value of goods or services or both or determine the rate 
of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a 
provisional basis and the proper officer shall pass an order, within a period not later than ninety days from the 
date of receipt of such request, a lowing payment of tax on provisional basis at such rate or on such value as 
may be specified by him - section 60(1) of CGST Act. 
Bond with security - The payment of tax on provisional basis may be a lowed, if the taxable person executes 
a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, 
binding the taxable person for payment of the di fference between the amount of tax as may be finally assessed 
and the amount of tax provisiona ly assessed - section 60(2) of CGST Act. 
Final  assessment  within six months - The proper officer sha l, within a period not exceeding six months 
from the date of the communication of the order under section 60(1), pass the final assessment order after 
taking into account such information as may be required for finalizing the assessment. 
The period specified in this sub-section may, on sufficient cause being shown and for reasons to be recorded 
in writi ng, be extended by the Joint/Additional Commissioner for a further period not exceeding six months and 
by the Commissioner for such further period not exceeding four years - section 60(3) of CGST Act. 
Interest  payable if tax payable after final  assessment  is more than  tax earlier  paid - The registered 
person shall be liable to pay interest on any tax payable on the supply of goods or services or both under 
provisional assessment but not paid on the due date specified under section 39(7) of CGST Act or the rules 
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about:blank 1/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 27 - Assessment and Audi t 
 
 
 
 
 
 
 
 
 
27.1 Meaning of 'assessment' 
CHAPTER 27 
 
Assessment  and Audit 
 
Assessment means determining the tax liability. 
 
'Assess' in a taxing statute means the computation of the income of assessee, the determination of tax payable 
by him, and the procedure for co lecting or recovering the tax - Bhopal Sugar Industries v. State of MP - 
AIR 1979 SC 537 = (1979) 3 SCC 792- similar view in J K Iron v. ITO AIR 1967 A l 248 = 65 ITR 386 
(A l HC). 
The word 'assessment' can comprehend the whole procedure for ascertaining and imposing liability upon the 
tax payer - Kalavati Devi v. CIT AIR 1968 SC 162 = 66 ITR 680 (SC). 
"Assessment" means determination of tax liability under this Act and includes self-assessment, re-assessment, 
provisional assessment, summary assessment and best judgment assessment - section 2(11) of CGST Act. 
27.1-1 Self-Assessment in GST 
 
Every registered taxable person shall self assess the taxes payable under this Act and furnish a return for each 
tax period as specified under section 39 of CGST Act- section 59 of CGST Act. 
27.2 Provisional Assessment 
 
Where the taxable person is unable to determine the value of goods or services or both or determine the rate 
of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a 
provisional basis and the proper officer shall pass an order, within a period not later than ninety days from the 
date of receipt of such request, a lowing payment of tax on provisional basis at such rate or on such value as 
may be specified by him - section 60(1) of CGST Act. 
Bond with security - The payment of tax on provisional basis may be a lowed, if the taxable person executes 
a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, 
binding the taxable person for payment of the di fference between the amount of tax as may be finally assessed 
and the amount of tax provisiona ly assessed - section 60(2) of CGST Act. 
Final  assessment  within six months - The proper officer sha l, within a period not exceeding six months 
from the date of the communication of the order under section 60(1), pass the final assessment order after 
taking into account such information as may be required for finalizing the assessment. 
The period specified in this sub-section may, on sufficient cause being shown and for reasons to be recorded 
in writi ng, be extended by the Joint/Additional Commissioner for a further period not exceeding six months and 
by the Commissioner for such further period not exceeding four years - section 60(3) of CGST Act. 
Interest  payable if tax payable after final  assessment  is more than  tax earlier  paid - The registered 
person shall be liable to pay interest on any tax payable on the supply of goods or services or both under 
provisional assessment but not paid on the due date specified under section 39(7) of CGST Act or the rules 
about:blank 2/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
made thereunder, at the rate specified under section 50(1) of CGST Act, from the first day after the due date 
of payment of tax in respect of the said supply of goods or services or both ti l the date of actual payment, 
whether such amount is paid before or after the issuance of order for final assessment - section 60(4) of 
CGST Act. 
Refund if tax payable was less - Where the taxable person is entitled to a refund consequent to the order 
for final assessment under section 60(3), interest shall be paid on such refund as provided in section 60(5). 
Such refund is subject to doctrine of unjust enrichment [section 54(8)] - section 60(5) of CGST Act. 
27.3 Scrutiny of returns 
 
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 - section 61(1) of CGST Act. 
In case the explanation is found acceptable, the taxable person shall be informed accordingly and no further 
action shall be taken in this regard - section 61(2) of CGST Act. 
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 discrepancy is accepted, 
the proper officer may initiate appropriate action including those under section 65, 66 or 67, or proceed to 
determine the tax and other dues under section 73 or section 74 - section 61(3) of CGST Act. 
27.4 Best Judgment Assessment  of non-filers of returns 
 
If a registered taxable person fails to furnish the return under section 39 or 45, even after the service of a 
notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best 
of his judgment taking into account a l the relevant material which is available or which he has gathered and 
issue an assessment order within a period of five years from date specified under section 44 for furnishing of 
the annual return for the financial year to which the tax not paid relates - section 62(1) of CGST Act. 
Where the taxable person furnishes a valid return within thirty days of the service of the assessment order 
under section 62(1), the said assessment order shall be deemed to have been withdrawn but the liability for 
payment of interest under section 50(1) or payment of late fee under section 47 will continue - section 62(2) of 
CGST Act. 
Even if such best judgment assessment is made, payment of interest and late fee is sti l payable. 
These provisions are independent of section 73 or 74. 
27.5 Best judgment Assessment  of unregistered persons 
 
Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to 
obtain registration even though liable to do so or whose registration has been cance led under section 29(2) 
but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person 
to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five 
years from the date specified under section 44 for furnishing of the annual return for the financial year to which 
the tax not paid relates - section 63 of CGST Act. 
No such assessment order shall be passed without giving a notice to show cause and without giving the person 
a reasonable opportunity of being heard - proviso to section 63 of CGST Act. 
These provisions are independent of section 73 or 74. 
 
27.5-1 Principles behind best judgment assessment 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 27 - Assessment and Audi t 
 
 
 
 
 
 
 
 
 
27.1 Meaning of 'assessment' 
CHAPTER 27 
 
Assessment  and Audit 
 
Assessment means determining the tax liability. 
 
'Assess' in a taxing statute means the computation of the income of assessee, the determination of tax payable 
by him, and the procedure for co lecting or recovering the tax - Bhopal Sugar Industries v. State of MP - 
AIR 1979 SC 537 = (1979) 3 SCC 792- similar view in J K Iron v. ITO AIR 1967 A l 248 = 65 ITR 386 
(A l HC). 
The word 'assessment' can comprehend the whole procedure for ascertaining and imposing liability upon the 
tax payer - Kalavati Devi v. CIT AIR 1968 SC 162 = 66 ITR 680 (SC). 
"Assessment" means determination of tax liability under this Act and includes self-assessment, re-assessment, 
provisional assessment, summary assessment and best judgment assessment - section 2(11) of CGST Act. 
27.1-1 Self-Assessment in GST 
 
Every registered taxable person shall self assess the taxes payable under this Act and furnish a return for each 
tax period as specified under section 39 of CGST Act- section 59 of CGST Act. 
27.2 Provisional Assessment 
 
Where the taxable person is unable to determine the value of goods or services or both or determine the rate 
of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a 
provisional basis and the proper officer shall pass an order, within a period not later than ninety days from the 
date of receipt of such request, a lowing payment of tax on provisional basis at such rate or on such value as 
may be specified by him - section 60(1) of CGST Act. 
Bond with security - The payment of tax on provisional basis may be a lowed, if the taxable person executes 
a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, 
binding the taxable person for payment of the di fference between the amount of tax as may be finally assessed 
and the amount of tax provisiona ly assessed - section 60(2) of CGST Act. 
Final  assessment  within six months - The proper officer sha l, within a period not exceeding six months 
from the date of the communication of the order under section 60(1), pass the final assessment order after 
taking into account such information as may be required for finalizing the assessment. 
The period specified in this sub-section may, on sufficient cause being shown and for reasons to be recorded 
in writi ng, be extended by the Joint/Additional Commissioner for a further period not exceeding six months and 
by the Commissioner for such further period not exceeding four years - section 60(3) of CGST Act. 
Interest  payable if tax payable after final  assessment  is more than  tax earlier  paid - The registered 
person shall be liable to pay interest on any tax payable on the supply of goods or services or both under 
provisional assessment but not paid on the due date specified under section 39(7) of CGST Act or the rules 
about:blank 2/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
made thereunder, at the rate specified under section 50(1) of CGST Act, from the first day after the due date 
of payment of tax in respect of the said supply of goods or services or both ti l the date of actual payment, 
whether such amount is paid before or after the issuance of order for final assessment - section 60(4) of 
CGST Act. 
Refund if tax payable was less - Where the taxable person is entitled to a refund consequent to the order 
for final assessment under section 60(3), interest shall be paid on such refund as provided in section 60(5). 
Such refund is subject to doctrine of unjust enrichment [section 54(8)] - section 60(5) of CGST Act. 
27.3 Scrutiny of returns 
 
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 - section 61(1) of CGST Act. 
In case the explanation is found acceptable, the taxable person shall be informed accordingly and no further 
action shall be taken in this regard - section 61(2) of CGST Act. 
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 discrepancy is accepted, 
the proper officer may initiate appropriate action including those under section 65, 66 or 67, or proceed to 
determine the tax and other dues under section 73 or section 74 - section 61(3) of CGST Act. 
27.4 Best Judgment Assessment  of non-filers of returns 
 
If a registered taxable person fails to furnish the return under section 39 or 45, even after the service of a 
notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best 
of his judgment taking into account a l the relevant material which is available or which he has gathered and 
issue an assessment order within a period of five years from date specified under section 44 for furnishing of 
the annual return for the financial year to which the tax not paid relates - section 62(1) of CGST Act. 
Where the taxable person furnishes a valid return within thirty days of the service of the assessment order 
under section 62(1), the said assessment order shall be deemed to have been withdrawn but the liability for 
payment of interest under section 50(1) or payment of late fee under section 47 will continue - section 62(2) of 
CGST Act. 
Even if such best judgment assessment is made, payment of interest and late fee is sti l payable. 
These provisions are independent of section 73 or 74. 
27.5 Best judgment Assessment  of unregistered persons 
 
Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to 
obtain registration even though liable to do so or whose registration has been cance led under section 29(2) 
but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person 
to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five 
years from the date specified under section 44 for furnishing of the annual return for the financial year to which 
the tax not paid relates - section 63 of CGST Act. 
No such assessment order shall be passed without giving a notice to show cause and without giving the person 
a reasonable opportunity of being heard - proviso to section 63 of CGST Act. 
These provisions are independent of section 73 or 74. 
 
27.5-1 Principles behind best judgment assessment 
about:blank 3/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
Best judgment assessment is one of the tools to harass taxable persons. Rea ly, best judgment assessment 
cannot be on basis of whims and fancies. 
It has been held that though best judgment assessment is an estimate and i nvolves guess work, the estimate 
must relate to some evidence or material and it must be something more than mere suspicion - Raghubar 
Mandal v. State of Bihar - (1957) 8 STC 770 (SC) = AIR 1957 SC 810. 
Even a best judgment assessment must be made reasonably and not surmises - Kathyaini Hotels v. ACCT 
(2004) 135 STC 77 (SC). 
 
In State of Kerala  v. C. Velukutty - (1966) 17 STC 465=60 ITR 239 (SC), it was held that 'best of 
judgment' means it does not depend on arbitrary caprice. Though there is element of guesswork, it shall have 
reasonable nexus to the available material and circumstances of the case. 
There is no doubt that authorities should try to make an honest and fair estimate of the income even in best 
judgment assessment and should not act arbitrarily, there is always a certain degree of guess work in best 
judgment assessment. If assessee did not maintain proper books of account, he himself has to be blamed for 
such assessment - Kachwala Gems v. JCIT (2007) 158 Taxman 71 (SC). 
In CST v. H M Esufali - (1973) 90 ITR 271 = 1973 SCC (Tax) 484 = 32 STC 77 (SC), it was observed - 
'The distinction between 'best judgment  assessment'  and assessment  based  on accounts  submitted  by an 
assessee  must  be  borne  in mind.  Sometimes  there  may be  i nnocent  or  trivial mistakes  in the  accounts 
maintained by assessee. There may be even certain unintended or unimportant omissions in those accounts; but 
yet the accounts may be accepted as genuine and substantia ly correct. In such case, assessments are made on 
basis of accounts maintained, even though the Assessing Officer may add back to the accounts price of items 
that might have been omitted to be included in the accounts. In such case, the assessment made is not a 'best 
judgment' assessment. It is primarily made on the basis of accounts maintained by the assessee. - - - If the 
assessee is maintaining false accounts to evade taxes, it is not possible for the Assessing Officer to find out 
precisely the turnover suppressed. He can only make an estimate of the suppressed turnover on the basis of 
the material before him. So long as the estimate  made by him is not arbitrary and has nexus with facts 
discovered, the same cannot be questioned. In the very nature of things, the estimate made may be over- 
estimate or an under-estimate. But, that is no ground for interfering with his 'best judgment'. - . - . - . - . - . - If 
the estimate made by assessing authority is a bona fide estimate and is based on a rational basis, the fact that 
there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best 
judge of the situation. The 'best judgment' is of the Assessing Officer and of nobody else. - . - . - High Court 
cannot substitute its best judgment for that of Assessing Officer - . - . - Court will have to first see whether 
accounts maintained by assessee were ri ghtly rejected as unreliable'. 
In Dhakeswari Cotton Mills v. CIT AIR 1955 SC 65 = (1954) 26 ITR 775 (SC 5 member), it was held that 
technical rules of evidence and pleadings are not applicable in 'best judgment assessment', but it cannot be 
pure guess. There must be something more than mere suspicion to support assessment. 
The best judgment assessment should be based on some material and basis must be disclosed to dealer. 
Dealer's explanation has to be considered. - S Mohammed v. CCT (1999) 116 STC 28 (Karn HC DB) * 
Dwijendra  Kumar v. Suptd. of Taxes (1990) 78 STC  393 (Gau HC) * Sankar  Trading  v. State of 
Tripura (1991) 92 STC 22 (Gau HC DB). 
In New Vishwakarma Engg Works v. CTT (1998) 110 STC 412 (A l HC), it was held that even in case of 
best judgment assessment, principles of natural justice are required to be fo lowed. Dealer should be informed 
of the material on which charge was going to be imposed and dealer must be given opportunity to rebut the 
effect of material, if he can. 
Page 4


about:blank 1/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 27 - Assessment and Audi t 
 
 
 
 
 
 
 
 
 
27.1 Meaning of 'assessment' 
CHAPTER 27 
 
Assessment  and Audit 
 
Assessment means determining the tax liability. 
 
'Assess' in a taxing statute means the computation of the income of assessee, the determination of tax payable 
by him, and the procedure for co lecting or recovering the tax - Bhopal Sugar Industries v. State of MP - 
AIR 1979 SC 537 = (1979) 3 SCC 792- similar view in J K Iron v. ITO AIR 1967 A l 248 = 65 ITR 386 
(A l HC). 
The word 'assessment' can comprehend the whole procedure for ascertaining and imposing liability upon the 
tax payer - Kalavati Devi v. CIT AIR 1968 SC 162 = 66 ITR 680 (SC). 
"Assessment" means determination of tax liability under this Act and includes self-assessment, re-assessment, 
provisional assessment, summary assessment and best judgment assessment - section 2(11) of CGST Act. 
27.1-1 Self-Assessment in GST 
 
Every registered taxable person shall self assess the taxes payable under this Act and furnish a return for each 
tax period as specified under section 39 of CGST Act- section 59 of CGST Act. 
27.2 Provisional Assessment 
 
Where the taxable person is unable to determine the value of goods or services or both or determine the rate 
of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a 
provisional basis and the proper officer shall pass an order, within a period not later than ninety days from the 
date of receipt of such request, a lowing payment of tax on provisional basis at such rate or on such value as 
may be specified by him - section 60(1) of CGST Act. 
Bond with security - The payment of tax on provisional basis may be a lowed, if the taxable person executes 
a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, 
binding the taxable person for payment of the di fference between the amount of tax as may be finally assessed 
and the amount of tax provisiona ly assessed - section 60(2) of CGST Act. 
Final  assessment  within six months - The proper officer sha l, within a period not exceeding six months 
from the date of the communication of the order under section 60(1), pass the final assessment order after 
taking into account such information as may be required for finalizing the assessment. 
The period specified in this sub-section may, on sufficient cause being shown and for reasons to be recorded 
in writi ng, be extended by the Joint/Additional Commissioner for a further period not exceeding six months and 
by the Commissioner for such further period not exceeding four years - section 60(3) of CGST Act. 
Interest  payable if tax payable after final  assessment  is more than  tax earlier  paid - The registered 
person shall be liable to pay interest on any tax payable on the supply of goods or services or both under 
provisional assessment but not paid on the due date specified under section 39(7) of CGST Act or the rules 
about:blank 2/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
made thereunder, at the rate specified under section 50(1) of CGST Act, from the first day after the due date 
of payment of tax in respect of the said supply of goods or services or both ti l the date of actual payment, 
whether such amount is paid before or after the issuance of order for final assessment - section 60(4) of 
CGST Act. 
Refund if tax payable was less - Where the taxable person is entitled to a refund consequent to the order 
for final assessment under section 60(3), interest shall be paid on such refund as provided in section 60(5). 
Such refund is subject to doctrine of unjust enrichment [section 54(8)] - section 60(5) of CGST Act. 
27.3 Scrutiny of returns 
 
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 - section 61(1) of CGST Act. 
In case the explanation is found acceptable, the taxable person shall be informed accordingly and no further 
action shall be taken in this regard - section 61(2) of CGST Act. 
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 discrepancy is accepted, 
the proper officer may initiate appropriate action including those under section 65, 66 or 67, or proceed to 
determine the tax and other dues under section 73 or section 74 - section 61(3) of CGST Act. 
27.4 Best Judgment Assessment  of non-filers of returns 
 
If a registered taxable person fails to furnish the return under section 39 or 45, even after the service of a 
notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best 
of his judgment taking into account a l the relevant material which is available or which he has gathered and 
issue an assessment order within a period of five years from date specified under section 44 for furnishing of 
the annual return for the financial year to which the tax not paid relates - section 62(1) of CGST Act. 
Where the taxable person furnishes a valid return within thirty days of the service of the assessment order 
under section 62(1), the said assessment order shall be deemed to have been withdrawn but the liability for 
payment of interest under section 50(1) or payment of late fee under section 47 will continue - section 62(2) of 
CGST Act. 
Even if such best judgment assessment is made, payment of interest and late fee is sti l payable. 
These provisions are independent of section 73 or 74. 
27.5 Best judgment Assessment  of unregistered persons 
 
Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to 
obtain registration even though liable to do so or whose registration has been cance led under section 29(2) 
but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person 
to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five 
years from the date specified under section 44 for furnishing of the annual return for the financial year to which 
the tax not paid relates - section 63 of CGST Act. 
No such assessment order shall be passed without giving a notice to show cause and without giving the person 
a reasonable opportunity of being heard - proviso to section 63 of CGST Act. 
These provisions are independent of section 73 or 74. 
 
27.5-1 Principles behind best judgment assessment 
about:blank 3/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
Best judgment assessment is one of the tools to harass taxable persons. Rea ly, best judgment assessment 
cannot be on basis of whims and fancies. 
It has been held that though best judgment assessment is an estimate and i nvolves guess work, the estimate 
must relate to some evidence or material and it must be something more than mere suspicion - Raghubar 
Mandal v. State of Bihar - (1957) 8 STC 770 (SC) = AIR 1957 SC 810. 
Even a best judgment assessment must be made reasonably and not surmises - Kathyaini Hotels v. ACCT 
(2004) 135 STC 77 (SC). 
 
In State of Kerala  v. C. Velukutty - (1966) 17 STC 465=60 ITR 239 (SC), it was held that 'best of 
judgment' means it does not depend on arbitrary caprice. Though there is element of guesswork, it shall have 
reasonable nexus to the available material and circumstances of the case. 
There is no doubt that authorities should try to make an honest and fair estimate of the income even in best 
judgment assessment and should not act arbitrarily, there is always a certain degree of guess work in best 
judgment assessment. If assessee did not maintain proper books of account, he himself has to be blamed for 
such assessment - Kachwala Gems v. JCIT (2007) 158 Taxman 71 (SC). 
In CST v. H M Esufali - (1973) 90 ITR 271 = 1973 SCC (Tax) 484 = 32 STC 77 (SC), it was observed - 
'The distinction between 'best judgment  assessment'  and assessment  based  on accounts  submitted  by an 
assessee  must  be  borne  in mind.  Sometimes  there  may be  i nnocent  or  trivial mistakes  in the  accounts 
maintained by assessee. There may be even certain unintended or unimportant omissions in those accounts; but 
yet the accounts may be accepted as genuine and substantia ly correct. In such case, assessments are made on 
basis of accounts maintained, even though the Assessing Officer may add back to the accounts price of items 
that might have been omitted to be included in the accounts. In such case, the assessment made is not a 'best 
judgment' assessment. It is primarily made on the basis of accounts maintained by the assessee. - - - If the 
assessee is maintaining false accounts to evade taxes, it is not possible for the Assessing Officer to find out 
precisely the turnover suppressed. He can only make an estimate of the suppressed turnover on the basis of 
the material before him. So long as the estimate  made by him is not arbitrary and has nexus with facts 
discovered, the same cannot be questioned. In the very nature of things, the estimate made may be over- 
estimate or an under-estimate. But, that is no ground for interfering with his 'best judgment'. - . - . - . - . - . - If 
the estimate made by assessing authority is a bona fide estimate and is based on a rational basis, the fact that 
there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best 
judge of the situation. The 'best judgment' is of the Assessing Officer and of nobody else. - . - . - High Court 
cannot substitute its best judgment for that of Assessing Officer - . - . - Court will have to first see whether 
accounts maintained by assessee were ri ghtly rejected as unreliable'. 
In Dhakeswari Cotton Mills v. CIT AIR 1955 SC 65 = (1954) 26 ITR 775 (SC 5 member), it was held that 
technical rules of evidence and pleadings are not applicable in 'best judgment assessment', but it cannot be 
pure guess. There must be something more than mere suspicion to support assessment. 
The best judgment assessment should be based on some material and basis must be disclosed to dealer. 
Dealer's explanation has to be considered. - S Mohammed v. CCT (1999) 116 STC 28 (Karn HC DB) * 
Dwijendra  Kumar v. Suptd. of Taxes (1990) 78 STC  393 (Gau HC) * Sankar  Trading  v. State of 
Tripura (1991) 92 STC 22 (Gau HC DB). 
In New Vishwakarma Engg Works v. CTT (1998) 110 STC 412 (A l HC), it was held that even in case of 
best judgment assessment, principles of natural justice are required to be fo lowed. Dealer should be informed 
of the material on which charge was going to be imposed and dealer must be given opportunity to rebut the 
effect of material, if he can. 
about:blank 4/6 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
Estimate of turnover on the basis of particulars available in dealer's books is not a best judgment assessment - 
Arul Constructions v. State of Tamil Nadu (2011) 43 VST 157 (Mad HC DB). 
 
27.6 Summary assessment in certain special cases 
 
The proper officer may, on any evidence showing a tax liability of a person coming to his notice, with the 
previous permission of Additional/Joint Commissioner,  proceed to assess the tax liability of such person to 
protect the interest of revenue and issue an assessment order, if he has sufficient grounds to believe that any 
delay in doing so will adversely affect the interest of revenue.- section 66(1) of CGST Act. 
If taxable person to whom that liability pertains is not ascertainable and such liability pertains to supply of 
goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and 
pay tax and any other amount due under section 64 - proviso to section 66(1) of CGST Act. 
On any application made by the taxable person within thirty days from the date of receipt of order passed 
under section 66(1) or on his own motion, if the Additional/Joint Commissioner considers that such order is 
erroneous, he may withdraw such order and fo low the procedure laid down in section 73 or 74 (of regular 
SCN and demand) - section 66(2) of CGST Act. 
27.7 Assessment  cannot  to be invalid on minor grounds, errors can be rectified 
 
Assessment or re-assessment cannot be invalidated on minor grounds. Notice cannot be cha lenged if acted 
upon. Errors apparent from records can be rectified - see sections 160 and 161 of CGST Act. 
27.8 Audit by tax authorities 
 
"Audit" means  the  examination  of records,  returns  and  other  documents  maintained  or furnished  by the 
registered person under this Act or the rules made thereunder or under any other law for the time being in 
force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, 
and to assess his compliance with the provisions of this Act or rules made thereunder - section 2(13) of CGST 
Act. 
Section 71(2) of CGST Act makes provision for demanding and making available records for audit. 
There was a system of EA-2000 audit in excise and service tax. This may conti nue in modified form in GST. 
The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake 
audit of any registered person for such period, at such frequency and in such manner as may be prescribed - 
section 65(1) of CGST Act. 
The tax authorities may conduct audit at the place of business of the taxable person and/or in their office. 
 
The registered  person shall be informed,  by way of a notice, sufficiently in advance,  not less than fifteen 
working days, prior to the conduct of audit in such manner as may be prescribed. 
The  audit  under  section  65(1)  shall be  completed  within  a  period  of three  months  from the  date  of 
commencement of audit - section 65(4) of CGST Act. 
'Commencement of audit' shall mean the date on which the records and other documents, ca led for by the tax 
authorities,  are made  available  by the registered  person or the actual institution of audit at the place  of 
business, whichever is later - Explanation to section 65(4) of CGST Act. 
27.8-1 Procedure during departmental audit 
 
During the course of audit, the authorised  officer may require  the taxable  person -  (i) to afford  him the 
necessary facility to verify the books of account or other documents as he may require ( i) to furnish such 
information as he may require and render assistance for timely completion of the audit - section 65(5) of 
CGST Act. 
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CHAPTER 27 - Assessment and Audi t 
 
 
 
 
 
 
 
 
 
27.1 Meaning of 'assessment' 
CHAPTER 27 
 
Assessment  and Audit 
 
Assessment means determining the tax liability. 
 
'Assess' in a taxing statute means the computation of the income of assessee, the determination of tax payable 
by him, and the procedure for co lecting or recovering the tax - Bhopal Sugar Industries v. State of MP - 
AIR 1979 SC 537 = (1979) 3 SCC 792- similar view in J K Iron v. ITO AIR 1967 A l 248 = 65 ITR 386 
(A l HC). 
The word 'assessment' can comprehend the whole procedure for ascertaining and imposing liability upon the 
tax payer - Kalavati Devi v. CIT AIR 1968 SC 162 = 66 ITR 680 (SC). 
"Assessment" means determination of tax liability under this Act and includes self-assessment, re-assessment, 
provisional assessment, summary assessment and best judgment assessment - section 2(11) of CGST Act. 
27.1-1 Self-Assessment in GST 
 
Every registered taxable person shall self assess the taxes payable under this Act and furnish a return for each 
tax period as specified under section 39 of CGST Act- section 59 of CGST Act. 
27.2 Provisional Assessment 
 
Where the taxable person is unable to determine the value of goods or services or both or determine the rate 
of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a 
provisional basis and the proper officer shall pass an order, within a period not later than ninety days from the 
date of receipt of such request, a lowing payment of tax on provisional basis at such rate or on such value as 
may be specified by him - section 60(1) of CGST Act. 
Bond with security - The payment of tax on provisional basis may be a lowed, if the taxable person executes 
a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, 
binding the taxable person for payment of the di fference between the amount of tax as may be finally assessed 
and the amount of tax provisiona ly assessed - section 60(2) of CGST Act. 
Final  assessment  within six months - The proper officer sha l, within a period not exceeding six months 
from the date of the communication of the order under section 60(1), pass the final assessment order after 
taking into account such information as may be required for finalizing the assessment. 
The period specified in this sub-section may, on sufficient cause being shown and for reasons to be recorded 
in writi ng, be extended by the Joint/Additional Commissioner for a further period not exceeding six months and 
by the Commissioner for such further period not exceeding four years - section 60(3) of CGST Act. 
Interest  payable if tax payable after final  assessment  is more than  tax earlier  paid - The registered 
person shall be liable to pay interest on any tax payable on the supply of goods or services or both under 
provisional assessment but not paid on the due date specified under section 39(7) of CGST Act or the rules 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
made thereunder, at the rate specified under section 50(1) of CGST Act, from the first day after the due date 
of payment of tax in respect of the said supply of goods or services or both ti l the date of actual payment, 
whether such amount is paid before or after the issuance of order for final assessment - section 60(4) of 
CGST Act. 
Refund if tax payable was less - Where the taxable person is entitled to a refund consequent to the order 
for final assessment under section 60(3), interest shall be paid on such refund as provided in section 60(5). 
Such refund is subject to doctrine of unjust enrichment [section 54(8)] - section 60(5) of CGST Act. 
27.3 Scrutiny of returns 
 
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 - section 61(1) of CGST Act. 
In case the explanation is found acceptable, the taxable person shall be informed accordingly and no further 
action shall be taken in this regard - section 61(2) of CGST Act. 
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 discrepancy is accepted, 
the proper officer may initiate appropriate action including those under section 65, 66 or 67, or proceed to 
determine the tax and other dues under section 73 or section 74 - section 61(3) of CGST Act. 
27.4 Best Judgment Assessment  of non-filers of returns 
 
If a registered taxable person fails to furnish the return under section 39 or 45, even after the service of a 
notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best 
of his judgment taking into account a l the relevant material which is available or which he has gathered and 
issue an assessment order within a period of five years from date specified under section 44 for furnishing of 
the annual return for the financial year to which the tax not paid relates - section 62(1) of CGST Act. 
Where the taxable person furnishes a valid return within thirty days of the service of the assessment order 
under section 62(1), the said assessment order shall be deemed to have been withdrawn but the liability for 
payment of interest under section 50(1) or payment of late fee under section 47 will continue - section 62(2) of 
CGST Act. 
Even if such best judgment assessment is made, payment of interest and late fee is sti l payable. 
These provisions are independent of section 73 or 74. 
27.5 Best judgment Assessment  of unregistered persons 
 
Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to 
obtain registration even though liable to do so or whose registration has been cance led under section 29(2) 
but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person 
to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five 
years from the date specified under section 44 for furnishing of the annual return for the financial year to which 
the tax not paid relates - section 63 of CGST Act. 
No such assessment order shall be passed without giving a notice to show cause and without giving the person 
a reasonable opportunity of being heard - proviso to section 63 of CGST Act. 
These provisions are independent of section 73 or 74. 
 
27.5-1 Principles behind best judgment assessment 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
Best judgment assessment is one of the tools to harass taxable persons. Rea ly, best judgment assessment 
cannot be on basis of whims and fancies. 
It has been held that though best judgment assessment is an estimate and i nvolves guess work, the estimate 
must relate to some evidence or material and it must be something more than mere suspicion - Raghubar 
Mandal v. State of Bihar - (1957) 8 STC 770 (SC) = AIR 1957 SC 810. 
Even a best judgment assessment must be made reasonably and not surmises - Kathyaini Hotels v. ACCT 
(2004) 135 STC 77 (SC). 
 
In State of Kerala  v. C. Velukutty - (1966) 17 STC 465=60 ITR 239 (SC), it was held that 'best of 
judgment' means it does not depend on arbitrary caprice. Though there is element of guesswork, it shall have 
reasonable nexus to the available material and circumstances of the case. 
There is no doubt that authorities should try to make an honest and fair estimate of the income even in best 
judgment assessment and should not act arbitrarily, there is always a certain degree of guess work in best 
judgment assessment. If assessee did not maintain proper books of account, he himself has to be blamed for 
such assessment - Kachwala Gems v. JCIT (2007) 158 Taxman 71 (SC). 
In CST v. H M Esufali - (1973) 90 ITR 271 = 1973 SCC (Tax) 484 = 32 STC 77 (SC), it was observed - 
'The distinction between 'best judgment  assessment'  and assessment  based  on accounts  submitted  by an 
assessee  must  be  borne  in mind.  Sometimes  there  may be  i nnocent  or  trivial mistakes  in the  accounts 
maintained by assessee. There may be even certain unintended or unimportant omissions in those accounts; but 
yet the accounts may be accepted as genuine and substantia ly correct. In such case, assessments are made on 
basis of accounts maintained, even though the Assessing Officer may add back to the accounts price of items 
that might have been omitted to be included in the accounts. In such case, the assessment made is not a 'best 
judgment' assessment. It is primarily made on the basis of accounts maintained by the assessee. - - - If the 
assessee is maintaining false accounts to evade taxes, it is not possible for the Assessing Officer to find out 
precisely the turnover suppressed. He can only make an estimate of the suppressed turnover on the basis of 
the material before him. So long as the estimate  made by him is not arbitrary and has nexus with facts 
discovered, the same cannot be questioned. In the very nature of things, the estimate made may be over- 
estimate or an under-estimate. But, that is no ground for interfering with his 'best judgment'. - . - . - . - . - . - If 
the estimate made by assessing authority is a bona fide estimate and is based on a rational basis, the fact that 
there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best 
judge of the situation. The 'best judgment' is of the Assessing Officer and of nobody else. - . - . - High Court 
cannot substitute its best judgment for that of Assessing Officer - . - . - Court will have to first see whether 
accounts maintained by assessee were ri ghtly rejected as unreliable'. 
In Dhakeswari Cotton Mills v. CIT AIR 1955 SC 65 = (1954) 26 ITR 775 (SC 5 member), it was held that 
technical rules of evidence and pleadings are not applicable in 'best judgment assessment', but it cannot be 
pure guess. There must be something more than mere suspicion to support assessment. 
The best judgment assessment should be based on some material and basis must be disclosed to dealer. 
Dealer's explanation has to be considered. - S Mohammed v. CCT (1999) 116 STC 28 (Karn HC DB) * 
Dwijendra  Kumar v. Suptd. of Taxes (1990) 78 STC  393 (Gau HC) * Sankar  Trading  v. State of 
Tripura (1991) 92 STC 22 (Gau HC DB). 
In New Vishwakarma Engg Works v. CTT (1998) 110 STC 412 (A l HC), it was held that even in case of 
best judgment assessment, principles of natural justice are required to be fo lowed. Dealer should be informed 
of the material on which charge was going to be imposed and dealer must be given opportunity to rebut the 
effect of material, if he can. 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
Estimate of turnover on the basis of particulars available in dealer's books is not a best judgment assessment - 
Arul Constructions v. State of Tamil Nadu (2011) 43 VST 157 (Mad HC DB). 
 
27.6 Summary assessment in certain special cases 
 
The proper officer may, on any evidence showing a tax liability of a person coming to his notice, with the 
previous permission of Additional/Joint Commissioner,  proceed to assess the tax liability of such person to 
protect the interest of revenue and issue an assessment order, if he has sufficient grounds to believe that any 
delay in doing so will adversely affect the interest of revenue.- section 66(1) of CGST Act. 
If taxable person to whom that liability pertains is not ascertainable and such liability pertains to supply of 
goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and 
pay tax and any other amount due under section 64 - proviso to section 66(1) of CGST Act. 
On any application made by the taxable person within thirty days from the date of receipt of order passed 
under section 66(1) or on his own motion, if the Additional/Joint Commissioner considers that such order is 
erroneous, he may withdraw such order and fo low the procedure laid down in section 73 or 74 (of regular 
SCN and demand) - section 66(2) of CGST Act. 
27.7 Assessment  cannot  to be invalid on minor grounds, errors can be rectified 
 
Assessment or re-assessment cannot be invalidated on minor grounds. Notice cannot be cha lenged if acted 
upon. Errors apparent from records can be rectified - see sections 160 and 161 of CGST Act. 
27.8 Audit by tax authorities 
 
"Audit" means  the  examination  of records,  returns  and  other  documents  maintained  or furnished  by the 
registered person under this Act or the rules made thereunder or under any other law for the time being in 
force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, 
and to assess his compliance with the provisions of this Act or rules made thereunder - section 2(13) of CGST 
Act. 
Section 71(2) of CGST Act makes provision for demanding and making available records for audit. 
There was a system of EA-2000 audit in excise and service tax. This may conti nue in modified form in GST. 
The Commissioner or any officer authorised by him, by way of a general or a specific order, may undertake 
audit of any registered person for such period, at such frequency and in such manner as may be prescribed - 
section 65(1) of CGST Act. 
The tax authorities may conduct audit at the place of business of the taxable person and/or in their office. 
 
The registered  person shall be informed,  by way of a notice, sufficiently in advance,  not less than fifteen 
working days, prior to the conduct of audit in such manner as may be prescribed. 
The  audit  under  section  65(1)  shall be  completed  within  a  period  of three  months  from the  date  of 
commencement of audit - section 65(4) of CGST Act. 
'Commencement of audit' shall mean the date on which the records and other documents, ca led for by the tax 
authorities,  are made  available  by the registered  person or the actual institution of audit at the place  of 
business, whichever is later - Explanation to section 65(4) of CGST Act. 
27.8-1 Procedure during departmental audit 
 
During the course of audit, the authorised  officer may require  the taxable  person -  (i) to afford  him the 
necessary facility to verify the books of account or other documents as he may require ( i) to furnish such 
information as he may require and render assistance for timely completion of the audit - section 65(5) of 
CGST Act. 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
On conclusion of audit, the proper officer sha l, within 30 days, inform the registered person, whose records 
are audited, of the findings, his rights and obligations and the reasons for the findi ngs - section 65(6) of CGST 
Act. 
Where the audit conducted under section 65(1) results in detection of tax not paid or short paid or erroneously 
refunded, or input tax credit erroneously availed or utilised, the proper officer may initiate action under section 
73 or 74 - section 65(7) of CGST Act. 
 
27.9 Special audit  by Chartered/Cost Accountant 
 
If at any stage of scrutiny, enquiry, investigation or any other proceedings before him, any officer not below the 
rank of Assistant Commissioner, having regard to the nature and complexity of the case and the interest of 
revenue, is of the opinion that the value has not been correctly declared or the credit availed is not within the 
normal limits,  he may,  with the prior approval of the Commissioner,  direct such registered  person by a 
communication in writing to get his records including books of account examined and audited by a chartered 
accountant or a cost accountant as may be nominated by the Commissioner - section 66(1) of CGST Act. 
Section 71(2) of CGST Act makes provision for demanding and making available records for audit. 
 
In Karnataka  State Chartered  Accountants Association v. State of Karnataka  (2016) 135 SCL 141 = 
68 Latest Case19 (Karn HC), provision in Karnataka Cooperative Societies Act which a lowed auditing of 
accounts by Cost Accountant was held valid. The provision does not result in encroachment on profession of 
Chartered Accountants. 
Audit  report  within  90 days with further  extension  of 90 days - The chartered  accountant  or cost 
accountant so nominated sha l, within the period of ninety days, submit a report of such audit duly signed and 
certified  by him to the said Assistant  Commissioner  mentioning therein such other particulars  as may be 
specified - section 66(2) of CGST Act. 
The Assistant Commissioner may, on an application made to him in this behalf by the registered person or the 
chartered accountant or cost accountant or for any material and sufficient reason, extend the said period by 
another ninety days - proviso to section 66(2) of CGST Act. 
Special audit in addition to any other audit - The provision of special audit under section 66(1) shall have 
effect notwithstanding that the accounts of the registered person have been audited under any other provision 
of this Act or any other law for the time being in force or otherwise - section 66(3) of CGST Act. 
Opportunity  of hearing  to taxable person - The registered person shall be given an opportunity of being 
heard in respect of any material gathered on the basis of special audit under section 66(1) which is proposed 
to be used in any proceedi ngs under this Act or rules made thereunder - section 66(4) of CGST Act. 
Expenses  of special  audit  - The expenses of the examination and audit of records under section 66(1), 
including the rem uneration of such chartered accountant or cost accountant, shall be determined and paid by 
the Commissioner and such determination shall be final - section 66(5) of CGST Act. 
Demand notice on basis of special audit report - Where the special audit conducted under section 66(1) 
results in detection of tax not paid or short paid or erroneously refunded,  or input tax credit erroneously 
availed, or input tax credit wrongly availed or uti lized, the proper officer may initiate action under section 73 or 
section 74 - section 66(6) of CGST Act. 
27.10 Power of CAG to call for information for audit 
 
C&AG can conduct audit of taxable persons also, termed as CERA Audit. 
 
C&AG is an authority appointed  under Article  148 of Constitution of India.  Article  151 of Constitution 
specifies that reports of C&AG shall be submitted to President of India, who causes these to be laid before