Madhya Pradesh High Court
M/S Ram Traders A Registered & Ors. vs The Divisional Dy.Comm.Comm.Tax & Ors on 1 December, 2011
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W.P. No. 3798 of 2004
M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner,
Commercial Tax & anr.
01.12.2011
Shri H.S. Shrivastava, learned Senior Advocate with Shri
Sandesh Jain, Counsel for the petitioner.
Shri Vivek Agrawal, G.A. for the respondents.
This order shall decide W.P. No.3798 of 2004 (M/s Shri
Ram Traders and another vs. The Divisional Dy. Commissioner,
Commercial Tax & another), W.P. No.3783 of 2004 (M/s Shri
Ram Traders and another vs. The Divisional Dy. Commissioner,
Commercial Tax & another) and W.P. No. 3785 of 2004
(Ghanshyam Das through LRs vs. The Divisional Dy.
Commissioner, Commercial Tax & another), involving similar
legal issues based on similar set of facts. For the convenience,
facts are taken from W.P. No.3798/2004.
Petitioner No.1 M/s Shri Ram Traders is a registered firm,
registered under the provisions of Commercial Tax Act and co-
petitioner Suresh Rai is the partner of the firm. Petitioners have
assailed order Annexure P-2 dated 19.7.2003 passed by the
Commercial Tax Department, Narsinghpur by which a penalty of
Rs.2,10,000/- was imposed upon the petitioners under Section
69(2) of the M.P. Commercial Tax Act, 1994 (hereinafter referred
as the Act) and order Annexure P-6 dated 17.8.2004 passed by
the Additional Dy. Commissioner, Commercial Tax, Jabalpur in
appeal by which the order Annexure P-2 was modified and
penalty was reduced to Rs.1,25,000/-.
Facts of the case are that the petitioners were assessed for
the assessment year 1.4.1999 to 31.3.2000 in which the Assessing Officer found that on 10.8.2000 an inspection was carried out in the premises of the petitioners and certain account
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W.P. No. 3798 of 2004M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner, Commercial Tax & anr.
01.12.2011 books and loose papers were found and seized. As per the enquiry report the matter was referred to Assistant Commissioner,Commercial Tax, Jabalpur by the Dy. Commissioner, Commercial Tax, Jabalpur on 30.4.2001. The account books and the papers which were seized were not tallying with the account books earlier produced by the assessee, so assessment was not possible on such account book and treating that the assessee had evaded the tax, best judgment assessment order was passed. The assessing Officer had also found that certain entries in the account books and loose papers were not explained by the assessee and the assessment order was framed against the petitioners by which the sale was enhanced, assessed at Rs.3,45,829/- and commercial tax was imposed. Against the order Annexure P-1, an appeal was preferred by the assessee which was decided vide order Annexure P-4 dated 25.6.2004. The appeal allowed partly and by reducing the tax of Rs.4658/-, the assessment order was modified. It is stated at the Bar that the order Annexure P-4 has attained finality.
As there was evasion of tax, a notice under Section 69 of the Act was issued to the petitioners for extending the petitioner an opportunity to explain why penalty be not imposed. The assessee had not cared to give response to the notice, so an ex parte penalty order Annexure P-2 was passed by which a penalty of Rs.2,10,000/- was imposed on the petitioners. Against this order the petitioners had preferred a revision which was partly allowed vide order Annexure P-6 dated 17.8.2004 (supra).
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W.P. No. 3798 of 2004M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner, Commercial Tax & anr.
01.12.2011 These orders are challenged in this petition.
Learned counsel appearing for the petitioners submitted that before imposition of penalty the officer ought to have recorded independent findings that the petitioners had acted deliberately in defiance of law or were guilty of conduct contumacious or dishonest, or acted in conscious disregard of their obligation. The penalty cannot be imposed merely on the ground that in the assessment year the sale was enhanced or some concealment was found. An independent finding is required to be recorded by the assessing officer while imposing the penalty. Reliance is placed to the Apex Court judgment in Hindustan Steel Ltd. vs. State of Orissa [(1070) 25 STC 211] (1969) 2 SCC 627 and M/s Anantharam Veerasinghaiah & Co. Vs. CIT, Andhra Pradesh [ 1980 Supp SCC 13] and submitted that the aforesaid penalty orders may be quashed, as the authorities had failed to record the aforesaid finding. That the petitioners were dealing mostly in the tax paid goods and in this regard he has referred various orders in which it was held that the petitioners were dealing with the tax paid goods and the taxable goods were of very small amount.
Shri Vivek Agrawal, learned G.A. appearing submitted that in view of the specific provision as contained in Sec.69(2) of the Act, the assessing officer rightly initiated the proceedings for imposition of penalty after issuing a notice and extending an opportunity of being heard. The petitioners had willfully remained absent in response to the notice so the penalty order was passed which is in accordance with law, needs no
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W.P. No. 3798 of 2004M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner, Commercial Tax & anr.
01.12.2011 interference of this Court. It was further submitted that it is a case in which tax was evaded so the petitioners were rightly imposed penalty by the assessing officer.
To appreciate the rival contentions of the parties, it would be appropriate if relevant provision is quoted. Section 69(2) of the act reads thus :-
69(2): The proceeding under sub-section (1) shall be initiated by the Commissioner or the appellate or revisional authority as the case may be, by issue of a notice in the prescribed form for giving the dealer an opportunity of being heard. On hearing the dealer, the Commissioner or the appellate or the revisional authority as the case may be, shall pass an order not later than one calendar year from the date of initiation of such proceeding or within such further time as allowed by the State Government, directing the dealer that (he shall in addition to the tax payable by him pay by way of penalty as sum which shall not be less than three times but shall not exceed five times of the amount of tax evaded].
The aforesaid provision specifically provides that if the assessing officer finds that tax was evaded then the assessing officer can initiate proceeding under sub section (1) by issuing a notice in the prescribed form for giving the dealer an opportunity of being heard. After hearing the dealer the authority can pass an order within one calendar year from the date of initiation of such proceeding or within such further time as allowed by the State Government, directing the dealer that in addition to the tax payable by him, pay by way of penalty a sum which shall not be less than three times but shall not exceed five times of the
5.....W.P. No. 3798 of 2004
M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner, Commercial Tax & anr.
01.12.2011 amount of tax evaded. The Apex Court in Hindustan Steel Ltd. considering the question of imposition of the penalty held that an order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged has either acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation. A penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.
The Apex Court in Anantaram (supra) considering the question held that in the penalty proceedings the taxing authority is bound to consider the matter afresh on the material before it and the burden to prove rest on the Revenue. No doubt the fact that the assessment order contains a finding that the disputed amount represent income constitute good evidence in the penalty proceedings but the finding in the assessment proceeding cannot be regarded as conclusive for the purposes of the penalty proceeding. The Apex Court further held that before a penalty can be imposed the entirety of circumstances must be taken into account and the order must point to the conclusion that the disputed amount represent income and the assessee has consciously concealed particulars of his income or deliberately furnished inaccurate particulars. In respect of falsity of the explanation if given by the assessee it was observed that it was
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W.P. No. 3798 of 2004M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner, Commercial Tax & anr.
01.12.2011 insufficient without there being in addition cogent material or evidence from which the necessary conclusion attracting a penalty could be shown. Reliance was placed by the Apex Court to Anwar Ali [1970 (76) ITR 696].
Now in the light of the law laiddown by the Apex Court in Hindustan Steel and Anantharam (supra), the orders passed by the authorities may be looked into. By order Annexure P-2, the assessing officer found that the assessee furnished incorrect return of the sales tax, evaded the tax on the basis of which assessing officer assessed for the additional tax and on this ground the penalty was imposed, and except this, no finding was recorded even by the revisional authority that there was deliberate concealment of sale or the assessees were guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation, failing which the aforesaid order imposing penalty cannot be sustained.
An Administrative order imposing a penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged has either acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation. A penalty will not also be imposed merely because it is lawful to do so. Inspite of a minimum penalty prescribed, the authority competent to impose the penalty may refuse to impose the penalty if the breach complained of was a technical or venial breach, flew from a bona fide though mistaken belief. See Karnataka Rare Earth
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W.P. No. 3798 of 2004M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner, Commercial Tax & anr.
01.12.2011 & anr. vs. Senior Geologist, Department of Mines & Geology [(2004) 2 SCC 783] and Bharjatya Steel Industries vs. Commissioner, Sales Tax, UP. [(2008) 11 SCC 617] In view of the aforesaid, we find that the orders passed by the authorities imposing penalty on the petitioners are not in accordance with the law laid down by the Apex Court in Hindustan Steel Ltd. and Anantharam (supra) and accordingly both the orders are not sustainable under the law and are quashed. The matter is remanded back to the assessing officer to decide the matter afresh after following the law laid down by the Apex Court in Hindustan Steel and Anantharam (supra). As the matters are old one , the authority is expected to decide the matter expeditiously, as far as possible within a period of six months from the date of communication of this order.
Before passing the order of penalty, the assessing officer shall issue a fresh notice to the petitioners by extending an opportunity of hearing. While dealing the matter, the assessing officer shall also consider the fact that whether the petitioners were dealing in the tax paid goods and the taxable goods were of small amount and the amount of penalty can be based on the aforesaid facts also . Any amount deposited by the petitioners in compliance of the penalty order shall be subject to final decision of the assessing officer.
No order as to costs.
(Krishn Kumar Lahoti) (Smt. Vimla Jain)
JUDGE JUDGE
vj
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W.P. No. 3798 of 2004
M/s Shri Ram Traders & anr. The Divisional Dy. Commissioner,
Commercial Tax & anr.
01.12.2011