(1) For the purposes of section 26, the Commissioner shall, in respect of any financial year, select by the 31st of March of the year following the financial year, such number of dealers as may be deemed fit, for audit, to be conducted either singly or by a team of officers for ascertaining the correctness of accounts maintained by such dealers. The number of registered dealers to be audited every year shall ordinarily be not more than ten percentum of the total number of registered dealers in the State.
(2) After making selection of the registered dealers under sub-rule (1), a list relating to each division shall be sent to concerned Joint Commissioner, Incharge of the Audit and a copy of the same shall also be forwarded to the Joint Commissioner Incharge of the Administration of the division.
(3) A list of dealers selected for Audit in respect of a division shall be displayed for public viewing on the notice board of the concerned Joint Commissioner, Incharge of the Audit and also on the notice board of the circle in which the concerned dealer is registered.
(4) The concerned Joint Commissioner, Incharge of the Audit shall constitute audit teams from amongst the officers posted under him or from amongst the officers posted in any circle of the division to conduct the audit of the dealers selected for Audit.
(5) The head of the audit team constituted under sub-rule (4) shall serve upon the dealer selected for audit, a notice in Form N-IV specifying therein, the time, date, the expected duration of the audit and the nature of accounts and documents to be examined by the audit team and the dealer shall comply with the terms of such notice.
Provided that the authority may, in respect of any particular dealer, and, for reasons to be recorded in writing, extend the date of Audit subject to the condition that such an extension may be allowed only once and that also for a period not exceeding one month.
(6) The audit authority may require the assistance of any authority or person for the cross verification of any information gathered during the course of an audit.
(7) The audit report drawn by the audit team shall be scrutinized by the Joint Commissioner, Incharge of the Audit and a final report shall be prepared, a copy of which shall be served upon the dealer.
(8) The dealer shall file his reply to the issues raised in the final report within a period not exceeding thirty days of the receipt of the report.
(9)(a) If, having regard to the final report and the reply filed by the dealer, the Joint Commissioner, Incharge of the Audit is of opinion that a further clarification is required, he shall direct the dealer to file a supplementary reply on the point or points specified in the notice issued in this behalf.
(b) If the Joint Commissioner, Incharge of the Audit after considering the final report and the reply or supplementary reply, if any, filed by the dealer, is satisfied that prima facie there is reason to believe that the dealer had not disclosed his correct tax liability or had concealed or omitted any fact leading to any reduction in the tax payable by him, he shall allot the file to any officer posted under him for the initiation of proceeding against the dealer and such officer shall proceed to reassess the dealer under section 31 of the Act:
Provided no re-assessment under section 31 shall be made unless the dealer is served with a notice in Form N-V.