Delhi High Court Rules GST Audit Under Section 65 Applies Post Retrospective Cancellation

The Delhi High Court delivered a significant ruling establishing that a goods and services tax audit initiated under Section 65 remains valid for timelines that fall after the retrospective cancellation of a business registration. Tax authorities retain the legal mandate to scrutinize financial records and transactions pertaining to the operational window, even if the formal registration status was later extinguished from a prior date. This judicial stance clarifies that the cessation of registration does not automatically erase statutory accountability for prior operational periods.

Under the legal framework, Section 65 empowers tax commissioners to undertake audits to verify turnover, tax payments, exemptions, and credit claims. Previously, taxpayers frequently argued that retrospective cancellation rendered subsequent procedural actions legally untenable. The court's interpretation balances administrative oversight with compliance, ensuring that businesses cannot evade scrutiny for periods when commercial activity was actively conducted under the registration umbrella. Tax practitioners and chartered accountants must advise clients to cooperate with ongoing audit notices despite historical cancellations of their registration certificates.

Practitioners should thoroughly review audit notices, compile historical transaction records, and prepare comprehensive submissions to address queries raised under Section 65. Bottom line: Verify your client's audit notices carefully, as retrospective registration cancellations do not exempt businesses from scrutiny for active operational periods.