1976 (9) TMI 51 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the taxing authority can start proceedings regarding imposition of penalty under section 36(2)(c) Explanation subsequent to the passing of the assessment order.
2. Whether a successor of the taxing authority passing the assessment order is competent to initiate proceedings under section 36(2)(c) Explanation.
3. Whether a finding of concealment of particulars or knowingly furnishing inaccurate particulars is necessary for initiating and passing an order levying penalty under section 36(2)(c) read with the Explanation.

Issue-wise Detailed Analysis:

1. Initiation of Penalty Proceedings Post-Assessment Order:
The judgment clarifies that the taxing authority cannot start proceedings for the imposition of a penalty under section 36(2)(c) Explanation after the passing of the assessment order if the record does not show that the authority reserved the right to take such action or intended to consider the imposition of a penalty. The court emphasized that the satisfaction of the Commissioner regarding concealment must be formed while assessing, which implies the period between the commencement of assessment proceedings and the quantification of tax. The term "while assessing" was interpreted to mean before the completion of the assessment order. The jurisdictional fact, i.e., the appearance of concealment to the Commissioner, must be recorded in the proceedings.

2. Competence of Successor to Initiate Penalty Proceedings:
Given that the taxing authority cannot start penalty proceedings post-assessment order without prior indication of intent, a successor of the taxing authority is not competent to initiate such proceedings under section 36(2)(c) Explanation. The court noted that the jurisdictional fact applies to the Explanation, and the satisfaction must be arrived at while assessing, not after the assessment order is passed. Consequently, if the original officer did not reserve the right or indicate an intention to consider a penalty, the successor cannot initiate proceedings.

3. Necessity of Finding of Concealment for Initiating and Passing Penalty Orders:
(a) Initiating Proceedings:
The court held that a finding of concealment of particulars or knowingly furnishing inaccurate particulars is not necessary for initiating proceedings under section 36(2)(c) read with the Explanation. The jurisdictional fact requires only that it appears to the Commissioner that there has been concealment or inaccurate particulars, which must be recorded.

(b) Passing Penalty Orders:
For passing an order levying a penalty under section 36(2)(c) read with the Explanation, the court concluded that a finding in terms of the Explanation is necessary. This means that the taxing authority must record a finding on whether the assessee failed to discharge the burden of proving that the payment of a lesser amount of tax was not due to gross or willful neglect. The Explanation embodies a rebuttable presumption, and the burden of proof on the assessee is akin to that in civil proceedings, requiring proof by a preponderance of probabilities rather than beyond a reasonable doubt.

Conclusion:
The court provided a comprehensive interpretation of section 36(2)(c) read with the Explanation, emphasizing the necessity of recording the jurisdictional fact of concealment while assessing, and clarifying the conditions under which penalty proceedings can be initiated and penalties imposed. The judgment underscores the procedural safeguards and the burden of proof required in penalty proceedings under the Bombay Sales Tax Act.