(1) (a) The Commissioner shall, under the provision under section 9B, select a certain number of registered dealers, ordinarily before the close of the year, for audit during the following year.

(b) The Commissioner may, where he considers it necessary to safeguard the interest of revenue or where any enquiry is required to be conducted on any specific issue or issues relating to any dealer, or class or classes of dealers, on being referred by any officer as referred to in sub-section (1) of section 15, direct for specific audit.

(c) The Commissioner may, on the basis of apparent revenue risk of the individual dealers, make selection of dealers for special or investigation audit and the revenue risk shall be determined on objective analysis of the risk parameters or on receipt of intelligence or information regarding evasion of tax.

(d) For the control of large taxpayers, the Commissioner may plan audit checks across the totality of the business of such dealers within an audit cycle of two years.

(2) All audits except those provided under clause (c) of sub-rule (1) shall be with prior notice to the dealer:

Provided that the Commissioner, for good and sufficient reasons, may dispense with prior notice for tax audit under sub-rule (1) in respect of any specific dealer or class or classes of dealers.

(3) The tax audit under sub-rule (1) shall be undertaken by a team constituted for the purpose by the Commissioner, as he may deem fit and such audit team may consist of one or more authorities appointed under any prescribed designation under VAT Act.

(4) (a) The audit shall ordinarily be taken up in the place of business of the dealer and the dealer shall render all necessary assistance, produce all accounts, documents, records and also allow access to the accounts, if any, maintained electronically, as may be required by the officers conducting audit.

(b) Subject to the provisions of sub-rule (2), where tax audit is conducted under clauses (a),(b) and (d) of sub-rule (1), the dealer shall be given prior notice in Form E 25, intimating the date and time, when the audit is proposed to be conducted, and the dealer shall be required to produce all accounts and records, as may be required, and extend all cooperation to the audit team for smooth conduct of audit.

(c) Where audit of a dealer is proposed to be taken up under clause (c) of sub-rule (1), prior approval of the next higher authority shall be taken:

Provided that when the audit visit is required to be made in course of an investigation or where there is reasonable apprehension that delay may lead to the disposal of the stock-in-trade or removal or destruction of books of account, records and documents, the approval of next higher authority shall be taken post facto, within twenty-four hours of the completion of such visit or return to headquarters, after completion of the audit, whichever is later.

(5)(a) Tax audit shall comprise of verification of all records, documents, books of account including electronic record, relating or incidental to the business of the dealer, physical verification of stock-in-trade, collection of sample of goods and examination of such other records and documents, as may be required to determine the actual tax liability of the dealer.

(b) A dealer, who fails to produce any accounts, record or document, in course of the audit, shall if the officer-in-charge of the audit team so requires by notice in Form E 26 produce such accounts, records and documents in the office on the date and time specified in that notice.

(c) Audit visit report in Form E 27 shall be submitted by the officer-in-charge of the audit team conducting audit to the Commissioner within seven days of the completion of the audit.

(6) The audit team, during any audit visit, shall explain the provisions of the Act and these rules so that the dealer does not face any difficulty in maintenance of books of account and due discharge of tax liability.