Separate Authorizations Mandatory for Non-Territorial AO of Dealer to Conduct VAT Audit and Assessment: Andhra Pradesh HC [Read Order]

The Andhra Pradesh High Court has held that an officer who is not the territorial Assessing Officer of a dealer must obtain separate authorizations for conducting an audit and for undertaking an assessment. In the absence of such dual authorizations, the proceedings conducted by such an officer would be invalid in law and liable to be set aside.

The petitioner is an unregistered dealer. She challenged the audit and assessment proceedings initiated by the 1st respondent, that is the Commercial Tax Officer for the financial years 2014-15 and 2015-16.

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The assessment order dated 25.01.2019, and the consequential penalty order dated 31.03.2020, were challenged on the ground that they had not been duly served on the petitioner. It was only on 21.02.2025 that the petitioner came to know about the passing of these orders and obtained certified copies.

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The petitioner asserted that the 1st respondent was not the territorial Assessing Officer, and therefore lacked the authority to conduct the audit or assessment. It was specifically contended that while the officer was authorized to conduct an assessment, no separate authorization had been granted to conduct an audit. However, the 1st respondent had proceeded to audit the petitioner’s accounts and issued the assessment and penalty orders based on that audit.

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Relying on previous decisions of the erstwhile High Court of Judicature at Hyderabad in Sri Balaji Flour Mills v. CTO-II, Chittoor and M/s. Dekars Fires & Security Systems Pvt. Ltd. v. Deputy Commissioner (CT), Secunderabad, the petitioner’s counsel contended that a single authorization cannot empower an officer to carry out both audit and assessment. Each function requires distinct statutory authorization under law.

Agreeing with the petitioner’s arguments, the bench of Justices R. Raghunandan Rao and Dr. K. Manmadha Rao ruled that the Andhra Pradesh High Court observed that “The Division Bench of the erstwhile High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh considering this issue had held that an officer, who is not the territorial Assessing Officer of a dealer would require separate authorizations for conduct of audit and assessment. In the absence of both authorizations, the conduct of audit and assessment by such an officer would be invalid and requires to be set aside.”

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Consequently, the Court set aside the impugned assessment and penalty orders and remanded the matter back to the territorial Assessing Officer for fresh proceedings in accordance with law, after affording an opportunity of hearing to the petitioner.

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The Court also directed that the period between the date of the original impugned orders and the receipt of this judgment by the territorial officer shall be excluded for the purpose of computing limitation.

To Read the full text of the Order CLICK HERE

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