TMI Blog2023 (4) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same, but in the Second Appeal the Tribunal set aside the order passed by the Appellate Authority and confirmed the order passed by the Assessing Authority which clearly indicates that the same has been passed by the Tribunal without any application of mind. Once the Assessing Authority has come to a conclusion that there is no mistake in the books of account, imposition of penalty under Section 7(5) of the O.E.T. Act cannot be sustained in the eye of law. There is no dispute that the Assessing Authority initiated proceeding under the O.S.T. Act but not under the O.E.T. Act. By asking information without proper manner cannot be treated as initiation of proceedings against the petitioner. As such, the Assessing Authority has committed error without initiating the proceeding under O.E.T. Act and without issuing notice to the petitioner under the O.E.T. Act - This Court in similar circumstances in the case of RAM KISHAN RAJKUMAR VERSUS ASSESSING AUTHORITY, CUTTAK-I WEST CIRCLE, CUTTACK AND ANOTHER [ 2004 (6) TMI 600 - ORISSA HIGH COURT ] has interfered with the assessment under Section 7 of the O.E.T. Act read with Rule 15 of the O.E.T. Rules (as it stood at the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sets. It maintains another register for claim of set off of entry tax on scheduled goods under the O.E.T. Act, as per the purchase value of the quantity of vehicles sold except tractor. 2.1 While making assessment under the O.S.T. Act for the year 2003-04, the above records of account, as maintained by the petitioner for its business both under the O.S.T. Act and the O.E.T. Act, were duly examined in comparison to the turnover of purchase of scheduled goods returned for 2003-04 as well as with the purchase statement submitted for the said year. Besides the above account, the detail utilization of way bills made by the petitioner for purchase of all types of vehicles, spares and accessories and all other scheduled goods, as discussed above, were verified in detail. On verification of assessment record under the O.E.T. Act, as per the returns filed, it was seen that continuous irregularities were there in filing the returns, i.e., going beyond the time limit as prescribed under O.E.T. Act, delay in payment of tax, filing of revised returns also in much delayed time beyond its prescribed date. The major amount of entry tax, as admitted by the petitioner, found paid on 27.11.2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction after verification of the statement of such purchase in prescribed E-1 Form submitted by the petitioner. Accordingly, tax was determined and the total tax due came to Rs.59,58,393.00. 2.4 Therefore, considering the non-payment of the total tax, as admitted in the revised returns in full within its due time, as prescribed under the O.E.T. Act, the petitioner was issued with show cause notices repeatedly under Rule 10(2) of the O.E.T. Rules for such irregularities and finding no reasonable explanation submitted by the petitioner up to satisfaction with production of account in response to said show cause notices, the petitioner was imposed with penalty of Rs.4,40,000/- under Section 7(5) of the O.E.T. Act, i.e., only considering 50% of the differential excess tax due disclosed in the revised returns at Rs.8,76,855/- paid with much delay. Thus, the Assessing Authority, vide order dated 07.01.2005, asssessed the penalty of Rs.4,40,000/- under Section 7(5) of the O.E.T. Act and directed the petitioner to pay the same. 2.5 The order dated 07.01.2005 of the Assessing Authority under Annexure-1 was challenged in appeal before the Asst. Commissioner of Sales Tax, Koraput Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of assessment. But determination has been made by the Assessing Authority for non maintenance of stock account in case of spare parts, which was not a genuine ground to reject the books of account by the Assessing Authority on presumption basis without any actual discrepancy/adverse detection made or any cogent materials found prompted for resorting to best judgment assessment. 5. In Khali Mohapatra v. State of Orissa, S.J.C. No. 114 of 1986 decided on 02.12.1994 , it has been held that even if the books of account was rejected, then there was no other material found to make the best judgment assessment and to make addition to the turnover of the assessee, such addition must be made towards possible suppression. The failure to maintain an annual stock account, as required under Section 15(2), is not by itself a ground to reject books of account. 6. In State of Orissa v. Gaurav Enterprises, (1993) 90 STC 397 (Ori), the Assessing Authority opined that in absence of such account, the cross verification of disclosed sales was not possible and, therefore, the best judgment was called for. But this Court held that the failure to maintain an annual stock account, as requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ology, (2004) 2 SCC 783 , the apex Court held that penalty is a liability imposed as a punishment on the party committing the breach. 11. In Pratibha Processors v. Union of India, AIR 1997 SC 138 , the apex Court observed that penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. 12. In Associated Cement Co. Ltd. v. Commercial Tax Officer, (1981) 4 SCC 578, the apex Court held that penalty ordinarily becomes payable when it is found that an assessee has wilfully violated any of the provisions of the taxing statute. 13. In view of the meaning attached to the word penalty under different provisions of different taxing statute, as discussed hereinbefore, in an unequivocal term it can be held that the penalty ordinarily becomes payable when it is found that an assessee has wilfully violated any of the provisions of the taxing statute. 14. Above being the meaning attached to the word penalty , if that would be taken into consideration in the present context, without accompanying the revised return, no best judgment assessment could be done by the Assessing Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Orissa Value Added Tax Act, 2004, a similar question had come up for consideration in M/s National Aluminium Comply Limited v. Deputy Commercial Taxes, Bhubaneswar-III Circle, Bhubaneswar, 2021 (1) OLR 828, wherein this Court held that imposition of penalty under Section 43(2) of OVAT Act, 2004 was not automatic and that there is a discretion in the Assessing Authority in this regard upon finding that there has been an escapement or underassessment of tax. Similar view has also been taken in M/s Jagadamba Polymers Pvt. Ltd. v. State of Odisha, STREV No.12 of 2015 disposed of on 06.12.2022, by which it has been held that under Section 10(2) of the O.E.T. Act, there is an element of discretion in the Assessing Authority to levy penalty where the escapement or under assessment of tax is without any reasonable cause. Therefore, since in the books of account of the petitioner there is no mistake, the same having been accepted by the authority, even if there has been non-maintenance of the stock register by the petitioner-dealing for Schedule-I of goods, the assessment made under the best judgment under Section 7(4) of the O.E.T. Act with an intention to impose huge penalty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntained under Section 7(5) of the O.E.T. Act is not applicable, in view of the ratio decided by this Court in the cases of M/s National Aluminium Company Ltd. and M/s Jagdamba Polymers Pvt. Ltd. (supra). 22. As a consequence thereof, the order dated 24.07.2013 passed by the Odisha Sales Tax Tribunal, Cuttack in S.A. No.79(ET)/2006-07 under Annexure-3 quashing the order dated 28.03.2006 passed by the Asst. Commissioner of Sales Tax, Koraput Range, Jeypore in First Appeal Case No. AAE(KOI) 106/2004-05 under Annexure-2 and confirming the order of assessment dated 07.01.2005 passed by the Sales Tax Officer, Ward- B, Koraput-I Circle, Jeypore under Annexure-1, cannot be sustained in the eye of law and is liable to be quashed and is hereby quashed and the order dated 28.03.2006 passed by the First Appellate Authority, viz., the Asst. Commissioner of Sales Tax, Koraput Range, Jeypore in First Appeal Case No. AAE(KOI) 106/2004-05 under Annexure-2 is upheld. 23. In the result, the question no.(v), which was considered for effective adjudication of this revision, is answered in favour of the assessee-petitioner and against the Department. Accordingly, the revision is allowed, but there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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