2016 (11) TMI 1539 - HC - VAT and Sales Tax

Penalty - it was alleged that the assessee had filed untrue and incorrect returns for the months of June to March 2012 - Since it was found that the assessee had filed fallacious returns a penalty of Rs. 33, 51, 750 being the double tax sought to be evaded was also imposed under section 67 of the Kerala Value Added Tax Act 2003. Held that - the Tribunal has considered various assertions of the assessee and has found that the assessee having deliberately filed an untrue return showing the sales and purchases to be zero when in fact there was substantial turnover he was thereafter not entitled to the benefit of section 23(6)(a) or section 22 of the Act - The Tribunal has concluded so for legally justifiable theorization since this was not a case where the assessee had omitted to file return but it was a case where the assessee admittedly filed an untrue and incorrect return. The orders of penalty have been modified by the first appellate authority directing the assessing authority to assess the tax after verification of the documents and books of account maintained by the assessee. The particular circumstances of this case is that the assessee had maintained true and correct books of account but had deliberately filed incorrect returns for the reason according to him that he wanted to delay the payment of tax. This attitude of the petitioner or any other assessee can never be countenanced and condoned and requires to be deprecated in the strongest manner as is available. Penalty upheld - decided against assessee.

Summary

Issues Involved:
1. Justification of treating accounted transactions as suppression.
2. Justification of not allowing revision of incorrect returns.
3. Error in not allowing input-tax credit.
4. Justification of penalty under section 67 of the Kerala Value Added Tax Act, 2003.

Detailed Analysis:

1. Justification of Treating Accounted Transactions as Suppression:
The Tribunal found that the assessee had filed returns showing zero sales and purchases for ten months despite substantial turnover recorded in the books of account. The Tribunal concluded that the returns were deliberately incorrect to avoid tax payment, as admitted by the assessee. The Tribunal, acting as the final statutory authority for fact assessment, found no reason to interfere with its findings and upheld the assessment order of the assessing authority under section 24 of the Act. The Tribunal emphasized that the returns were not merely incorrect due to inadvertence but were filed with confutative intentions.

2. Justification of Not Allowing Revision of Incorrect Returns:
The petitioner argued that the assessing authority should have allowed them to revise the incorrect return under section 22(2) or section 42(2) of the Act. However, the Tribunal noted that section 22(2) allows for a fresh return only if the original return is rejected for technical reasons under section 22(1). Since the petitioner’s returns were rejected for deliberate misstatements, they were not entitled to file a fresh return. The Tribunal also clarified that section 42(2), which pertains to annual returns, was not applicable as the petitioner was required to file monthly returns. The Tribunal held that the petitioner’s application to revise the return was untenable and without legal support.

3. Error in Not Allowing Input-Tax Credit:
The Tribunal relied on the judgment of the Kerala High Court in Venus Marketing v. State of Kerala, which stated that input-tax credit should be granted strictly according to statutory provisions and not in cases of detected suppression. The Tribunal found that since the assessee had suppressed turnover, they were not entitled to input-tax credit. The Tribunal concluded that the Department should be cautious in granting such benefits to dealers involved in tax evasion.

4. Justification of Penalty under Section 67 of the Kerala Value Added Tax Act, 2003:
The Tribunal upheld the penalty imposed under section 67, which was double the tax sought to be evaded. The first appellate authority had already modified the penalty by directing the assessing authority to quantify the turnover after verifying the documents. The Tribunal found no reason to interfere further, noting that the petitioner had maintained true books of account but filed incorrect returns to delay tax payment. The Tribunal directed the assessing authority to assess the tax after verifying the books of account, including purchase bills, while confirming the penalty imposed.

Conclusion:
The Tribunal’s order was upheld with minor modifications. The petitioner was granted leniency to reassess the tax after verifying the books of account, provided they paid Rs. 1,00,000 as costs to the respondent. The penalty imposed remained confirmed. The Tribunal’s jurisdiction was exercised without error, and the orders were found to be legally justified.