Delhi High Court allows Goods and Services Tax audit under Section 65 despite retrospective registration cancellation

The Delhi High Court ruled that a retrospective cancellation of Goods and Services Tax (GST) registration does not prevent tax authorities from initiating and conducting a compliance audit under Section 65 of the relevant statute for the period when the registration was active. The court carefully distinguished prior rulings such as Tvl. Raja Stores, preserving existing taxpayer safeguards while upholding the revenue department's jurisdiction to inspect past records.

Section 65 empowers tax authorities to audit registered persons to verify turnover, tax paid, and input tax credit claims. When a registration is cancelled with retrospective effect, questions often arise regarding whether the legal fiction of non-existence wipes out historical audit liability. The court clarified that statutory audit powers remain intact for transactions that occurred while the taxpayer was officially registered and operating under the tax net.

GST consultants and compliance officers must maintain financial books and tax records for all operational periods, even if registrations are subsequently cancelled retrospectively. Practitioners should review audit notices carefully to ensure authorities stay within the active operational window governed by the ruling. Bottom line: Retrospective cancellation relieves future compliance burdens but does not erase past tax audit obligations.