Madras High Court
The State Of Tamil Nadu vs Assistant Commissioner Of Sales Tax on 28 March, 2018
Bench: S.Manikumar, M.Govindaraj
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.03.2018 C O R A M THE HON'BLE MR.JUSTICE S.MANIKUMAR AND THE HON'BLE MR.JUSTICE M.GOVINDARAJ T.C.R.No.76 of 2018 The State of Tamil Nadu Represented by the Deputy Commissioner (Commercial Taxes), Coimbatore Division, Coimbatore-18. ... Petitioner v. Tvl.Mangal Marbles, 1025, Mettupalayam Road, Coimbatore. ... Respondent Prayer: Tax Case Revision is filed under Section 38 of the TNGST Act, 1959, to revise the order dated 16.12.2002, passed in Coimbatore Tribunal Appeal No.463 of 1997, on the file of the Sales Tax Appellate Tribunal (Additional Bench), Coimbatore. For petitioner ... Mr.V.Hari Babu Addl. Government Pleader (Taxes) O R D E R
(Order of the Court was made by S.MANIKUMAR, J) Instant Tax Case Revision is filed to revise the order dated 16.12.2002, passed in Coimbatore Tribunal Appeal No.463 of 1997, on the file of the Sales Tax Appellate Tribunal (Additional Bench), Coimbatore.
2. Facts as deduced from the material on record are that Tvl.Mangal Marbles, dealer in Marbles Stone, were assessed, on a total and taxable turnover of Rs.24,10,111/- and Rs.23,81,033/- respectively, for the assessment year 1994-95. However, the Assessing Authority has enhanced the turnover of the respondent, based on the inspection conducted in their place of business on 04.03.1994. Contending inter alia that the dealers had not maintained a detailed closing stock inventory or day-to-day stock account, he had arrived at the closing stock value as on 31.03.1994 as Rs.6,10,377/- and arrived at the purchase suppression of Rs.5,21,339/-. But the respondent had shown the closing stock as per trading account, for the year 1994-95 on Rs.11,22,716/-. Therefore, the assessing authority had arrived at the sales suppression and the estimated sales suppression and levied tax on the respondent and also penalty of Rs.1,22,796/-, under Section 12(3)(b) of TNGST Act, 1959.
3. Aggrieved over the assessment, the dealer, filed an appeal in A.P.No.60 of 1997, before the Appellate Assistant Commissioner (CT), Coimbatore, disputing the 1% addition made for defects; estimation of alleged actual suppression of Rs.6,15,180/-; the equal addition of Rs.6,15,180/- for estimated suppression and levy of penalty, stating that the stock variation had been arrived at notionally, and there was no purchase or sales omission and therefore, there was no actual suppression and that there could not be another estimation, as the stock variation had been arrived at, from 04.03.1994 to 31.03.1995. It was further contended that the entire period of assessment has been taken and therefore, there is no necessity for estimated suppression. Considering the facts and circumstances of the case, the Appellate Assistant Commissioner (CT), Coimbatore, vide order, dated 16.09.1997, held as follows:
"I heard the arguments of both the representative and perused the records produced before me. The Assessing Authority has taken the value of the actual stock as on 4.3.1994 found at the time of inspection as Rs.8,38,874-00, he has added the purchases from 4.3.1994 to 31.3.1994, and arrived at the closing stock value as Rs.6,10,377-00 but the appellants have shown the closing stock value of Rs.11,22,716-00. Hence the Assessing Authority has concluded that there is purchase suppression of Rs.5,21,339-00 and adding a Gross profit of 18% he has arrived at the actual sales suppression of Rs.6,15,180/-. As the appellants did not maintain the closing stock inventory for stock or day-to-day stock account, the actual sales suppression was worked out on the basis of the actual stock available at the time of inspection. This working has been done on the basis of the inspection o 4.3.1994, on the basis of the actual stock taken, on the basis of the stock value given by the appellants and it has been done in a reasonable manner. The appellants have not adduced any reason for the difference in the closing stock as per the trading account submitted by them and as per the closing stock that should be as estimated by the Enforcement Wing Officers. In the absence of detailed closing stock inventory, day to-day stock account etc., in the absence of any other records to reconcile the difference the view of the Assessing Authority and the Enforcement Wing Officers treating this difference as purchase suppression is correct. Hence, I sustain the actual suppression found out by the Enforcement Wing Officers. However the closing stock as on 31.03.1994 is treated as Rs.11,22,716-00 against Rs.6,10,377-00 estimated by Enforcement Wing Officers and the sales estimated on this basis treating the difference as purchase suppression and adding Gross Profit, thereafter, there is no necessity to estimate further suppression for the year 1994-95. As the entire closing stock as on 31.3.1994 as reported by the appellants have been taken into consideration and assessed, there is no necessity for further estimation. In view of the above, I delete the estimated suppression made. The appellants are eligible for consequential relief in penalty also on the tax due on the turnovers deleted by me.
The defects enumerated vide (i) to (iii) of page 2 of assessment order are material defects warranting addition. Hence, I sustain the 1% addition made to book turnover.
In fine, the appeal is modified."
4. Being aggrieved the same, the respondent has preferred C.T.A.No.463 of 1997, before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, along with connected appeals. While confirming the order passed by the Appellate Assistant Commissioner in sustaining the actuals, after deleting the addition made for probable omission, the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, vide order, dated 16.12.2002, set aside the penalty imposed under Section 12(3)(b), as hereunder:
"6. We have heard the arguments of both the sides and perused the connected records. The learned Additional State Representative would argue to sustain the order of the Appellate Assistant Commissioner stating that in the absence of detailed closing stock inventory or day-today stock account; the Assessing Officer has no other alternative but to arrive at the sales suppression on the basis of the figures found therein in the accounts. Thus, he would argue that the actual suppression so arrived at is correct and if there is balance of tax at the time of assessment, penalty also warranted for the year 1993-94 and 1994-95.
7. On a perusal of the assessment records, it is noticed that the place of business of the appellant was inspected by the Enforcement Wing Officers on 4.3.94 and at the time of inspection, the following defects were noticed:
i. No day-to-day stock account was maintained;
ii. The stock inventory for the opening stock on 1.4.93 was not maintained and consequently the stock available could not be compared for verifying the correctness;
iii. The day book and ledger was not maintained for 1993-94 but only a chittai was maintained.
Considering the above defects, an offence was compounded and 'C' fees of Rs.1,000/- was collected for the defects noticed at the time of inspection. The accounts of the dealers were subsequently called for the checked. At the time of inspection, the actual stock available was taken in the presence of the dealers and the value of the goods were arrived at. It is stated that for want of stock book and other records, the correctness of the stock had to be only verified with reference to the figures furnished as opening stock, and comparing with the purchases and sales from 1.4.93 to 4.3.94 and thus arrived at the stock variation as given below:
CTA 462/97.
Opening stock of marbles on 1.4.93 as per books : Rs.14,23,497-00 Purchase from 1.4.93 to 4.3.94 : Rs.14,55,017-00 Freight from 1.4.93 to 4.3.94 : Rs. 6,50,658-00 Electricity charges : Rs. 20,500-00 Wages for cutting & Polishing : Rs. 34,600-00 ----------------------- Total : Rs.36,84,272-00 Less: Actual stock on 4.3.94 : Rs. 8,38,874-00 ----------------------- Value of goods sold : Rs.28,45,398-00 Add: 18% Gross Profit derived as per books : Rs. 5,12,172-00 ----------------------- Estimates sales for the period : Rs.33,57,570-00 Sales recorded upto 4.3.94 : Rs.28,04,873-00 ----------------------- Actual suppression of sales @ 16% : Rs.5,52,697-00 ----------------------
8. Basing on the above inspection report, suppression was arrived at as given below:
Actual suppression of sales for 1993-94 : Rs.5,52,697-00 Add Estimated suppression for the year :Rs.5,52,697-00
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Total turnover assessed u/s.16. Rs.11,05,394-00 at 16%
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Penalty at Rs.1,64,980/- was levied u/s. 16(2) of the Act.
CTA.463/97.
Value of actual stock on 4.3.94 Rs.3,38,874-00 Purchase from 4.3.94 to 31.3.94 Rs. Nil
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Total Rs.8,38,874-00 Less: Purchases value of the goods sold from 4.3.94 to 31.3.94 Rs.2,80,247 * 100/118 Rs.2,37,497-00 ------------------ Closing stock to be Rs.6,10,377-00 Closing stock declared as per books Rs.11,22,716-00 ------------------- Excess being purchase suppression Rs.5,21,339-00 ------------------ Suppressed turnover proposes and assessed: Actual suppression as worked out above Rs.6,15,180-00 Add: Equal amount for estimated suppression Rs.6,15,180-00 ------------------ Total suppression worked out for 94-95 Rs.12,30,360-00@16% ------------------
9. On first appeal, the learned Appellate Assistant Commissioner sustained the actual suppression estimated (Stock variation) since the entire turnover stock from 1.4.94 to 4.3.94 has been taken and the sales suppression has been arrived but he has deleted the equal addition made in the assessment as unwarranted. However, he has sustained 1% addition made for defects for the assessment year 1994-95 in respect of both the appeal.
10. The issue involved in the above appeals are as follows:
CTA No.462/97 (1993-94):
i. Turnover disputed : Rs.5,52,697/- at 16% ii. Penalty u/s.16(2) : Rs.1,64,980/-
CTA No.463/97 (1994-95) i. Turnover disputed : Rs.6,15,180/- @ 16 ii. Penalty u/s.12(3)(b) : Rs.1,22,796/-
CTA No.465/97(1993-94):
i. Disputed Turnover Rs.2,45,924/-@8% Rs.4,18,835/-@16% : Rs.6,64,659/-
ii.Penalty u/s.16(2) : Rs.1,64,465/- CTA No.464/97 (1994-95): i. Disputed Turnover Rs.2,43,050/-@8% Rs.4,13,842/-@16% : Rs.6,56,892/- ii.Penalty u/s.12(3)(b) : Rs.1,08,361/- Issue No.I: CTA 462/97 Rs.5,52,697/- CTA 463/97 Rs.6,15,180/- CTA 465/97 Rs.6,64,659/- CTA 464/97 Rs.6,56,892/-
11. The learned Authorised Representative would argue that the entire addition hings around the shop inspection made on 4.3.94, and the alleged suppression has only been notionally arrived by the inspecting officers, which was adopted by the Assessing Officer and erroneously confirmed by the first appellate authority. He would further argue that the authorities below ought to have noted that the alleged various were not quantitatively arrived at but only notionally. Further, the learned Authorised Representative would emphasis the fact that the Assessing Officer has penalised the appellants for showing higher value of stock which had duly been reflected in the accounts for the year 1994-95 through the monthly A1 returns filed for the assessment year 1994-95. It is further insisted that the appellate authority failed to consider the factual position stated supra, especially the amount of closing stock of more than that arrived at by the inspecting officers and adopted by the Assessing Officer. It is further contended that in order to make a revision u/s.16(1) of the TNGST Act, it is obligatory on the part of the revision officer to prove that atleast one transaction of suppression either in purchase or sales had taken place dehors the accounts. Whereas, in the instant case, there is no such turnover off the books. Thus, the learned Authorised Representative would emphatically argue that the entire addition confirmed by the appellate authority had earlier been arrived at only notionally and not quantitatively with reference to the actual value of the goods existed at that point of time. It is also to be pointed out that such various of stock petition was arrived at considering the opening stock, purchases, sales and closing stock of goods as shown therein in the book of accounts and hence, it cannot be inferred that the additions so made is arrived at purely on notional basis only. Moreover, the learned first appellate authority after considering the factual position, deleted the equal addition made for probable omission and thereby sustained the actuals. Therefore, we are of the view that the order passed by the learned Appellate Assistant Commissioner in sustaining the actuals after deleting the addition made for probable omission, is found to be in order and hence it calls for no interference. Therefore, the turnover so modified and adopted by the learned Appellate Assistant Commissioner is hereby confirmed.
Issue No.II(Penalty):
CTA 462/97 Penalty levied u/s.16(2) Rs.1,64,980/-
CTA 463/97 Penalty levied u/s.12(3)(b) Rs.1,22,796/-
CTA 465/97 Penalty levied u/s.16(2) Rs.1,64,465/-
CTA 464/97 Penalty levied u/s.12(3)(b) Rs.1,08,361/-
12. With regard to the levy of penalty, the learned Authorised Representative would argue that the first appellate authority has erred in sustaining the penalty on the turnover confirmed in the impugned orders that in order to invoke the penal provisions, concrete evidences of suppression either in purchases or sales is a condition precedent and in the absence of such evidences, penalty is not sustainable. In other words, the authorities below have failed to follow the dictum that the levy of penalty is not automatic but is dependent on existence of element of mensrea which is conspicuously absent in the instant case. The learned Authorised Representative would further emphasis the point that the penalty has been levied purely and solely based on an arithmetical calculation without even aniota of evidence of suppression either in purchase or sales in any form of documents. The authorities below also failed to note that the turnovers based on which the alleged suppression has been arrived at, are all available in the books of accounts produced before the Departmental Officers and thus the levy of penalty directed to be made is benefit of validity and therefore prayed to set aside the same.
13. It is to be noted that the entire assessment relating to the assessment year 1993-94 and 1994-95 relating to the appellants Tvl.Mangal Marbles, Coimbatore and Classique Marbles, Coimbatore made u/s.12 and 16 i.e.both revision and original, are mainly based on the inspection held on the premises of the appellants concerned on 4.3.94, wherein no specific purchase or sales suppressions were detected and as well no incriminating records were also found to have been recovered. As a matter of fact, only the stock position was arrived at notionally but on subsequent processing, the inspecting officers have arrived at the stock difference basing on the opening stock of goods, the closing stock, purchases and sales so maintained and produced by the appellants themselves. It is also eminent to note that higher value of closing stock was shown by the appellants than that arrived at by the inspecting officer and adopted by the Assessing Officer also. For example, in respect of appeal in CTA 463/97 (94-95), the appellants have shown closing stock as per books at Rs.11,22,716/- whereas, the inspecting officers have arrived at the value of such closing stock only at Rs.6,10,377/-. Similarly, in respect of appeal in CTA No.464/97 (94-95) the appellants have shown closing stock as per books at Rs.11,22,716/- whereas, the inspecting officers have arrived at the value of such closing stock only at Rs.6,10,377/-. Similarly, in respect of appeal in CTA No.464/97 (1994-95) the appellants have shown the closing stock as per Trading Account at Rs.9,47,365/- as against the closing stock arrived at by the Inspecting Officers at Rs.3,85,990/- only. It is evident that the entire suppression was arrived at basing on the figures shown in the books of accounts and thereby produced by the appellants themselves. Thus, the learned Authorised Representative would argue that in order to levy penalty u/s. 16(2), it is seen that the escaped turnover ought to have been established beyond any pale of doubt. But in the instant cases, no such concrete evidences are available.
14. As per the ratio of the decision of the Supreme Court in the case of State of Madras, V.S.G.Jayaraj Nadar and Sons reported in 28 STC 700 penalty can be levied u/s.12(3) of the TNGST Act on the ground that the dealer had submitted an incomplete or incorrect return only, if the assessment has been made to the best of his judgment by the Assessing Authority, where certain items which are not included in the turnover and discovered from the dealers own account books and the Assessing Authority includes these items in the dealers turnover, the assessment cannot be regarded as based on the best judgment and penalty can be levied in respect of such items. Whereas the account books are accepted along with other records, there can be no ground for making a best judgment assessment. In the case on hand, no turnover outside the books had been detected by the Assessing Authority. In 13 STC 686, in the the case of Deputy Commissioner of Commercial Taxes, Madras Division v. Manohar Brothers, it was held that the non-obtaining of Form C will have the consequence of the assessee not obtaining the benefit of Section 8(1) it would not in any way vitiate the return or render it incomplete or defective. Referring to the decision reported in 94 STC 157, of their Lordships of the Madras High Court in the case of State of Tamil Nadu v. Indian Silk Traders, the learned Authorised Representative, for the appellants had further argued that the bonafides of the assessees have to be gone into before imposing the penalty. Their Lordships have also referred to the decision of the Apex Court in 45 STC 197 in the case of Cement Marketing Company of India Limited vs. Assistant Commissioner of Sales Tax, according to the learned Authorised Representative for the appellants Section 12(3)(b) would operate only in the case of a best judgment assessment whereby the return filed by the assessee appears to the Assessing Authority to be incomplete or incorrect. The assessee had already filed a return and claimed exemption and no turnover dehors the accounts found detected by the Assessing Authority.
15. In the case law reported in Kathiresan Yarn Stores v. the State of Tamil Nadu reported in 42 STC 121, wherein it was held that:
"In order that penalty may be imposed, it must be possible first to come to the conclusion that there was actually a turnover and further that turnover was not disclosed. The mere fact that there is a best judgment assessment, particularly, when the assessment is based on the inference flowing from the inability of the assessee to establish the case pleaded by him, will not be penalty, for the purpose of imposition of penalty, for the decree of proof required for the imposition of penalty is quite different from and is of a much higher other than that required for the purpose of making a best judgment assessment. Though an estimate made on best of judgment basis may be legal, for the purpose of imposing penalty something more concrete is required which would enable the judicial mind to reach the conclusion that the dealer actually had the turnover which was fixed by best judgment."
16. The High Court of Madras in the case of K.N.Viswanathan Chettiar and Sons in T.C.1191/79, dt.11.12.1979 has held that "the discrepancy in stock though suggestive of sales or purchase omissions warranting rejection of accounts and for estimation, cannot be held to establish wilful non-disclosure of turnover and hence penalty is not called for."
17. The decision of the High Court in W.P.Nos.2183 to 2192/2000, 8367 to 8371/2000, 18787/2000 and 6104 of 2001 dated 1.10.2001 in the case of Appollo Saline Pharmaceuticals (P) Limited, Tirunelvelli is applicable to the case on hand in deciding the issue of levy of penalty u/s.12(3)(b) of the TNGST Act. The decision of the Hon'ble High Court is extracted hereunder:
"Though other sub-sections of Section 12 were amended by the State Legislature subsequent to the date of the judgment in the case of Jayaraj Nadar and Sons (28 STC 700), Sections 12(1) and 12(2) have remained in the same forms. The legislative intention therefore, except during the period 3.12.79 to 27.5.93 and on and after 1.4.96 must be taken to be to, permit the levy of penalty only in case where the assessment is a best judgment assessment made on an estimate and not by relying solely on the accounts furnished by the assessee in the prescribed return. On and after 1.4.96 an explanation has been added below Section 12(3) which requires the turnover relating to the tax assessed on the basis of the account of the assessee, to be disregarded, while determining the turnover on which the penalty is to be levied under Section 12(3)."
18. Therefore, the case on hand relates to the assessment years 1993-94 and 1994-95 in which the assessment was made on the basis of the accounts and not based on any other materials and were only estimates. Therefore, it could be regarded as an assessment made u/s.12(1) to which the penal provisions of Sec.12(3) are not attracted. Therefore, under the clear facts and circumstances of the case and relying on the decisions of the Hon'ble High Court and Apex Court, if the above facts are taken into consideration, we have no hesitation to hold that the amended provisions of the TNGST Act, 1959 u/s.12(3)(b) could not be invoked and consequently the levy of penalty imposed by the Assessing Officer is ordered to be set aside in full.
In fine, all the four appeals stands partly dismissed and partly allowed."
5. Being aggrieved, the State has preferred the instant Tax Case Revision.
6. Mr.V.Haribabu, learned Additional Government Pleader (Taxes) submitted that the Assessing Authority resorted to revision of assessment for the year 1993-94 and best judgment assessment for the year 1994-95, by rejecting the returns filed by the dealers as incorrect and incomplete, in view of the fact that the inspection made in the place of business of the dealers on 04.03.1994, revealed suppression. He further submitted that the Tribunal ought to have seen that the Assessing Officer had issued proper notice before making revision/assessment in this case. The dealers also filed reply for the revision/assessment proposed which were duly considered and final orders passed, by confirming the revision/assessment proposed.
7. He further submitted that the Tribunal ought to have seen that the first appellate authority had sustained the actual suppression assessed, but had deleted the equal addition with consequential penalty, which is not acceptable. The Assessing Officer had proved beyond doubt the willfulness on the part of the dealer in suppressing their transactions, which is evident from the fact that the dealer did not even maintain the day book till the time of inspection 04.03.1994, ie., the fag end of the financial year. Therefore, the revision of assessment made for the year 1993-94 and best judgment assessment made for the year 1994-95, is quite in order and inasmuch as the revision/assessment made is quite justified, the consequent levy of penalty under Section 16(2)/12(3)(b) is warranted.
8. Learned Additional Government Pleader (Taxes), further submitted that the Tribunal has failed to note that the assessment made should be regarded as an assessment made under Section 12(2) of the Act, since there is difference between the sales reported and sales suppression arrived at, the time of inspection conducted on 04.03.1994 and therefore, submitted that penal provision under Section 12(3)(b) is warranted and accordingly, the penalty levied is correct and as per the decision reported in 125 STC 107.
9. He further submitted that the Tribunal has erred in deleting the penalty, in view of the fact that the levy of penalty, under Section 12(3)(b), is not called for, as per the amended provisions of Section 12(3)(b) of the TNGST Act and therefore, levy of penalty is automatic and it should be levied, when there is balance of tax payable to the Government.
Heard the learned counsel appearing for the petitioner and the materials available on record.
10. Section 12(3)(b) of the Act deals with, submission of incorrect or incomplete return and for the purpose of levy of penalty, under Clause (b), the tax assessed on the following kinds of turnover shall be deducted from the tax assessed on final assessment, (i) twenty-five per cent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax assessed on final assessment by not more than five per cent;
(i-a) fifty per cent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax assessed on final assessment by more than five per cent but not more than fifteen per cent;
(ii) seventy-five per cent of the difference of the tax assessed and the tax paid as per return, if the tax paid as per the return falls short of the tax assessed on final assessment by more than fifteen per cent but not more than twenty-five per cent;
11. In Appollo Saline Pharmaceuticals (P) Ltd., Vs. Commercial Tax Officer (FAC) and Others, reported in {(2002) 125 STC 505}, considering a decision of the Hon'ble Supreme Court in State of Madras Vs. Jayaraj Nadar & Sons {(1971) 28 STC 700, at paras 5 to 7, held as follows:-
5. The Supreme Court in the case of State of Madras Vs. Jayaraj Nadar & Sons {(1971) 28 STC 700, at page 701, after extracting Section 12 (2) of the Tamil Nadu General Sales Tax Act, 1959, which remains in the same form even now, observed thus:-
The question is whether penalty can be levied while making the assessment under sub-Section (2) of the above Section merely because an incorrect return has been filed. The High Court was of the view that it is only if the assessment has to be made to the best of the judgment of the assessing authority that penalty can be levied. It seems to us that the High Court came to the correct conclusion because sub-sections (2) and (3) have to be read together. Sub-Section (2) empowers the assessing authority to assess the dealer to the best of its judgment in two events: (i). if no return has been submitted by the dealer under sub-section (1) within the prescribed period, and (ii). If the return submitted by him appears to be incomplete or incorrect. Sub-Section (3) empowers the assessing authority to levy the penalty only when it makes an assessment under sub-Section (2). In other words, when the assessing authority has made the assessment to the best of its judgment, it can levy a penalty. It is well known that the best judgment assessment has to be on an estimate which the assessing authority has to make not capriciously but on settled and recognised principles of justice. An element of guess-work is bound to be present in best judgment assessment but it must have a reasonable nexus to the available material and the circumstances of each case: [see State of Kerala Vs. C.Velukutty {(1966) 17 STC 465 (sc)}. Where account books are accepted along with other records, there can be no ground for making a best judgment assessment.
6. The law so declared that the best judgment assessment is based on an estimate and is not one based solely on the account books was reiterated by the Supreme Court in the case of Commissioner of Sales Tax, Madhya Pradesh Vs. H.M.Esufali H.M.ABDULALI {(1973) 32 stc 77}.
7. Though other sub-Sections of Section 12 were amended by the State Legislature subsequent to the date of the judgment in the case of Jayaraj Nadar & Sons {(1971) 28 STC 700 (SC), Sections 12 (1) and 12 (2) have remained in the same form. The legislative intention therefore, except during the period December 3, 1979 to May 27, 1993 and on and after April 1, 1996 must be taken to be to, permit the levy of penalty only in case where the assessment is a best judgment assessment made on an estimate and not by relying solely on the accounts furnished by the assessee in the prescribed return. On and after April 1, 1996 an explanation has been added below Section 12 (3) which requires the turnover relating to the tax assessed on the basis of the accounts of the assessee, to be disregarded, while determining the turnover on which the penalty is to be levied under Section 12 (3).
12. In Indira Industries Vs. State of Tamil Nadu, reported in {2014 (69) VST 139 (Mad.), this Court considered a question, as to whether, levy of penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, was justifiable, particularly, when there was no suppression pointed out by the Revenue that the Claim of the assessee related only to concessional rate of tax. This Court held as follows:
8. .......Thus when the turnover assessed under the assessment order is drawn from the books of accounts itself, and there being no reference to any specific concealment of the turnover in the accounts, the question of invoking section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 would not arise. The Explanation to section 12(3)(b) of the Act specifies the turnover which merited to be excluded for the purpose of levy of penalty, one such being the turnover representing addition related to book turnover itself. Thus, even while calculating the turnover for the purpose of levy of penalty, the turnover, which are already available in the books of accounts are to be excluded and only those turnover which are estimated having reference to a specific concealment alone, the purpose of addition, invite the penal provisions under the Tamil Nadu General Sales Tax Act, 1959. In the decision reported in [2002] 125 STC 505 (Mad) (Appollo Saline Pharmaceuticals (P) Limited v. Commercial Tax Officer (FAC)) this court pointed out that when the assessment is based on the accounts turnover, the question of levy of penalty does not arise.
9. In the circumstances, applying the said decision reported in [2002] 125 STC 505 (Mad) (Appollo Saline Pharmaceuticals (P) Limited v. Commercial Tax Officer (FAC)) and the Explanation to section12(3)(b) of the Tamil Nadu General Sales Tax Act, the order of the Sales Tax Appellate Tribunal in levying penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 is set aside and the tax case (revision) is allowed. No costs.
13. In Tax Case Revision No.186 of 2009, dated 28/7/2016, between Tvl. Shyam Air Fridge, Vellore and The State of Tamil Nadu, rep. By The Deputy Commissioner (CT), Vellore, on the facts and circumstances of the case, at para No.18, a Hon'ble Dsivision Bench of this Court held as follows:-
Levy of penalty would not be justifiable, if at the time of assessment, turnover has been recorded as per the books of accounts, verified by the department and in such circumstances, suppression cannot be attributed. Transaction giving rise to taxable turnover, has been categorically declared by the assessee as composite works contract and at the concessional rate of 4%, tax has been paid. In such circumstances, it cannot be contended that it is a deliberate and wilful non-disclosure of turnover, in the return and thus rightly proceeded, under Section 12 (3) (b) of the Act, which deals with submission of incorrect or incomplete return. Though penalty is leviable under the provisions of the Act, while exercising discretion, the assessing officer is required to take note of the bona fides of the assessee. Contention of the respondent that levy of penalty under Section 12 (3) is automatic, cannot be accepted, in the light of the explanations to Section 12 (3) of the Act.
14. The above decisions apply to the case on hand. Following the same, Tax Case Revision Petition is dismissed and the substantial question of law is answered in favour of the assessee. No costs.
(S.M.K.,J) (M.G.R.,J) 28.03.2018 S.MANIKUMAR,J and M.GOVINDARAJ,J skm To The Sales Tax Appellate Tribunal (Additional Bench), Coimbatore.
T.C.R.No.76 of 201828.03.2018