Initiation of Proceedings by SCN u/s 74 without Scrutiny of Returns under Section 61 is Valid: HC

Case Details: Devi Traders v. State of Andhra Pradesh - [2023] 152 taxmann.com 22 (Andhra Pradesh)

Judiciary and Counsel Details

• • U. Durga Prasad Rao & Smt. Venkata Jyothirmai Pratapa, JJ.
  • B. Abhay Siddanth Mootha for the Petitioner.
  • Y.N. Vivekananda for the Respondent.

Facts of the Case

In the instant case, the demand of tax was made under section 74 of CGST Act, 2017 without having recourse to scrutiny under section 61. The petitioner filed writ petition and contended that the proper officer should first conduct scrutiny of returns and if any discrepancies were found, then notice shall be issued and if there was failure to give satisfactory explanation then the officer proceeded to take action under section 74.

High Court Held

The Honorable high Court noted that Sections 73 and 74 are not controlled by section 61 as reference to same is absent in law. The Section 74 uses “where it appears” conferring wide scope as information may be from any credible source.

Therefore, the proper officer may proceed under Section 74 based on action under section 61 on scrutiny of returns or section 65 on audit or some other facts or information. Thus, it was held that the argument against initiation of proceedings by show cause notice under section 74 without scrutiny of returns under section 61 was liable to be rejected and writ petition was dismissed.