TMI Blog1995 (2) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer? (iii) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that even when the assessment of the applicant was made on the basis of returns, which were filed late, still Explanation (2) to section 36(2)(c) is attracted and the appellate authority could invoke that Explanation for confirming the penalty levied by the Sales Tax Officer under section 36(2)(c) of the Act?" 2. The assessee M/s. Indoswe Engineers (P) Ltd., is a manufacturer of non-ferrous extrusions and extruded products. It is registered as a dealer both under the Bombay Sales Tax Act, 1959 ("the Bombay Act") and the Central Sales Tax Act, 1956 ("the Central Act"). It was assessed for the period July 1, 1977 to June 30, 1978, under both the Bombay Act and the Central Act by the Sales Tax Officer, Pune, on December 31, 1981. The tax position as per the assessment orders passed by the Sales Tax Officer is as under: Bombay Act Central Act Returned Determined Returned Determined Tax assessed 3,16,539 3,21,758 1,76,802 1,61,934 Set-off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the tax paid would be less than 20 per cent and no penalty would be leviable under section 36(2)(c) as per the assessment order. 4.. The Sales Tax Officer accepted the cause shown by the assessee in reply to the show cause notice under section 36(3) of the Act and did not impose any penalty under section 36(3) of the Act. He, however, levied penalty under section 36(2)(c) of the Act. The amount of penalty levied under the Bombay Act was Rs. 25,000. Similarly, penalty of Rs. 27,000 was levied under the Central Act under section 36(2)(c) of the Bombay Act read with section 9(2A) of the Central Act. It is pertinent to note that though the Sales Tax Officer dropped the proceedings initiated for levy of penalty under section 36(3) of the Act for failure, without reasonable cause, to pay the tax in time, he took the said default in consideration while levying penalty under section 36(2)(c) of the Act which is evident from his following observation in the order of penalty: "However, on taking a lenient view, penalty under section 36(2)(c) is levied at Rs. 25,000 which otherwise would have been leviable under section 36(3) had returns been filed in time, but tax was paid late." 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner in pursuance of the above notice through his Sales Tax Practitioner and objected to the proposal of the Assistant Commissioner to impose penalty under section 36(2)(c) of the Act by invoking the rule of evidence contained in Explanation (2) to the said section. It was contended that the Assistant Commissioner had no jurisdiction to do so. It was also submitted that assessment having been completed under section 33(3) of the Act on the basis of the returns furnished by the assessee, though belatedly, Explanation (2) had no application. The Assistant Commissioner did not accept any of the above contentions of the assessee and confirmed the penalty by his order dated August 31, 1983, with the aid of Explanation (2). He, however, reduced the quantum of penalty from Rs. 25,000 to Rs. 20,000 and from Rs. 27,000 to Rs. 22,500 under the Bombay Act and the Central Act respectively. 6.. The assessee appealed against the above orders of the Assistant Commissioner to the Maharashtra Sales Tax Tribunal ("the Tribunal"). Before the Tribunal it was contended on behalf of the assessee that while hearing the appeal, the Assistant Commissioner had no power to convert the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax Officer and assessment has been made on the basis thereof under section 33(3) of the Act. Mr. Joshi further contends that Explanation (1) and Explanation (2) are mutually exclusive and a case can fall under either of the two but not under both. According to him, it is clear from the language of Explanation (2) that it applies only to cases of failure to submit return resulting in a best judgment assessment under section 33(5) of the Act. It is also contended by Mr. Joshi that the appellate authority, in exercise of its power under section 55(6)(b) of the Act, cannot take resort to Explanation (2) to sustain the penalty levied by the Sales Tax Officer with the aid of the deeming provision contained in Explanation (1). He next contends that the condition precedent for invoking the rule of evidence contained in Explanation (2) is totally absent in the instant case because there is nothing to show that the failure to file the returns within the prescribed date was "without sufficient cause". According to the counsel, there is enough material on record to establish that there was "sufficient cause" for the failure to furnish return within the prescribed period. Counsel further c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and various High Courts that once a broad question has been referred, the High Court is not required to limit itself only to the particular aspect on which decision was given by the Tribunal. There is no limitation that the reference should be limited only to those aspects of the question which were argued before the Tribunal or decided by the Tribunal. All aspects may be argued and considered where the question involves more than one aspect. As observed by the Supreme Court in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589, a question of law might be a simple one, having its impact at one point or it may be a complex one, trenching over an area with approaches leading to different points therein. Such a question might involve more than one aspect, requiring to be tackled from different standpoints. It will be an over-refinement of the position to hold that each aspect of a question is a different question for the purpose of the reference. Once a question is referred, it is open to the High Court to consider all aspects thereof. Reference may also be made in this connection to a recent decision of the Supreme Court in Salem Co-operative Central Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the dealer by way of penalty, in addition to any tax assessed or reassessed or found due in the appeal or revision proceedings, as the case may be, a sum not exceeding one and one-half times the amount of the tax. Explanation.-(1) Where a dealer furnishing returns has been assessed by the Commissioner under (3) or (4) of section 33, or assessed under sub-section (3) of section 41, or reassessed under clause (b) of sub-section (1) of section 35, or in whose case an order has been passed under section 55 or clause (a) of sub-section (1) of section 57, and the total amount of tax paid by the dealer for any year is found to be less than eighty per cent of the amount of tax as so assessed or reassessed or found due in appeal or revision, then, for the purpose of clause (c), he shall be deemed to have concealed the turnover, or knowingly furnished inaccurate turnover liable to tax, unless he proves to the satisfaction of the Commissioner, that the payment of a lesser amount of tax was not due to gross or wilful neglect on his part. Explanation.-(2) Where a dealer fails without sufficient cause to furnish returns in respect of any period by the prescribed date, then for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out." This legal position was reiterated by the Supreme Court in Commissioner of Income-tax v. Anwar Ali [1970] 76 ITR 696 in the following words (at page 700): ".......It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings." It was observed (at page 700): "In England also it has never been doubted that such proceedings are penal in character." The decision of House of Lords in Fattorini (Thomas) (Lancashir) Ltd. v. Inland Revenue Commissioners [1942] 1 All ER 619; 24 TC 328; [1943] 11 ITR (Supp.) 50 was referred to this connection. It is also well-settled that provisions dealing with penalty should be construed strictly within the term and language of the particular statute and in case of doubt, in a manner favourable to the assessee. If the court finds that the language of a taxing provision is ambiguous or capable of more meaning than one, then the court has to adopt the interpretation which favours the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttracted and the onus will be on the Revenue to prove the concealment by adducing necessary evidence. 17.. If the conditions precedent for applicability of any of the two Explanations exist, the assessee would fall within the mischief of that Explanation and the onus to prove the negative, i.e., that the payment of lesser amount of tax was not due to gross or wilful neglect on his part [in a case falling under Explanation (1)] or that he had not concealed the whole turnover liable to tax as assessed [in a case falling under Explanation (2)] would be shifted to the assessee. He would then be deemed to have concealed the turnover or knowingly furnished inaccurate particulars of the turnover liable to tax under Explanation(1) or to have concealed the whole of the turnover liable to tax as assessed or reassessed under Explanation (2). These presumptions are, however, rebuttable. The assessee may rebut the same by producing cogent and relevant material. If the assessee discharges the burden put on him by the Explanation, the onus of proof shifts to the Revenue to produce further evidence and material to prove affirmatively the ingredients of section 36(2)(c). If it fails to do so, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he burden will shift to the Revenue to prove the positive element required for concealment under section 36(2)(c) of the Act. 20.. Moreover, as stated earlier, Explanation (1) and Explanation (2), fall within the realm of rule of evidence. It is, therefore, competent to the authority which imposes the penalty to invoke the aid of any of two Explanations in reaching the final conclusion even if it had not been mentioned in the show cause notice. It would also be open to the appellate or revisional authority to invoke any of these Explanations in course of hearing of appeal or revision. [See Commissioner of Income-tax v. Drapco Electric Corporation [1980] 122 ITR 341 (Guj) and Kantilal Manilal v. of Income-tax [1981] 130 ITR 411 (Guj)]. It would also be permissible for the appellate or revisional authority to sustain the penalty levied under the substantive provision with the aid of any of the two Explanations. It is also open to invoke the Explanation other than the one invoked by the assessing authority, if it finds that the other Explanation was wrongly invoked. However, before doing so, it must draw the attention of the assessee to the Explanation sought to be invoked to enab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for the year under consideration was less than eighty per cent of the amount of tax assessed by him. He, therefore, invoked Explanation (1) to section 36(2)(c) and initiated proceedings for levy of penalty under that provision by issuing a show cause notice. He also initiated proceedings for levy of penalty under sub-section (3) of section 36 of the Act for the failure of the assessee to pay the tax within the prescribed time without any reasonable cause. The assessee showed cause in both the proceedings. So far as delay in payment of tax is concerned, it was stated that the taxes could not be paid in time due to financial difficulties caused by labour trouble, strike, credit squeeze, etc. The Sales Tax Officer accepted this explanation about the reasonable cause for the delay in payment of taxes and dropped the proceedings under section 36(3) of the Act. In reply to the proposed levy of penalty under section 36(2)(c) with the aid of Explanation (1), the assessee set out the reasons for the difference between the tax paid and the tax assessed. The Sales Tax Officer did not accept this explanation and levied penalty under section 36(2)(c) of the Act with the aid of the deeming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,000 and Rs. 4,500 under the Bombay Act and the Central Act respectively. The assessee challenged the order of the Assistant Commissioner before the Tribunal. Besides challenging the power of the Assistant Commissioner to invoke Explanation (2) for the first time, it was also contended by the assessee that he had rebutted the presumption of deemed concealment by producing the closed and adjusted books of account before the Sales Tax Officer which were accepted and assessment was made on the basis thereof. It was pointed out that no discrepancy was found in the said books of account. The Tribunal did not find any merit in the objection in regard to the power of the Assistant Commissioner as it was of the opinion that it was open to the Assistant Commissioner to invoke the rule of evidence contained in Explanation (2) to justify the levy of penalty. The Tribunal also held that Explanation (2) was attracted in the instant case as the assessee had failed to rebut the presumption of deemed concealment. The Tribunal also did not agree with the assessee that the presumption of concealment stood rebutted by production of closed and adjusted books of account which were found correct a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order appealed against on an altogether different ground which had never been raised before the original authority or considered by it. In view of such wide powers, he can definitely sustain penalty levied under section 36(2)(c) of the Act by taking resort, for the first time in the appeal, to the rule of evidence contained in any of the two Explanations thereto and the presumption of deemed concealment contained therein. He can consider the legality of the order of penalty by applying any of the two Explanations, if the conditions precedent for its applicability are present, no matter whether it had been applied by the original authority or not. In a given case, he may sustain the penalty levied by the original authority with the aid of any of the Explanations, without the aid thereof if the Explanation relied upon by the original authority is found not applicable to the facts of that case, by recording a positive finding of concealment, if the materials on record justify such a finding. The only restriction on the exercise of this power is that he should give an opportunity to the assessee of its intention to do so to enable him to put forward his case in that light and to chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment having been made to the best of his judgment without any returns on record, the assessee is "deemed to have concealed the whole turnover liable to tax as assessed". Obviously, Explanation (2) will apply only to assessee assessed under sub-section (5) of section 33. Third, even if Explanation (2) applies, the condition precedent for invoking the same does not exist in the present case. There is nothing on record to show that the Assistant Commissioner was prima facie satisfied that the assessee failed "without sufficient cause" to furnish returns in respect of the relevant quarters by the prescribed date. In fact, there was material on record to the contrary. Fourth, even if Explanation (2) applies, the presumption of concealment of the whole turnover was rebutted by the assessee by showing that he had disclosed the correct turnover in the returns as well as in the books of account which was accepted by the Sales Tax Officer. Admittedly, no discrepancy was found in the said books of account. The turnover shown by the assessee was accepted as the correct turnover. Under the circumstances, in our opinion, the Assistant Commissioner was not justified in rejecting the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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