TMI Blog2010 (12) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... n petition deserves to be allowed by answering the questions of law raised above in favour of the Revenue and against the assessee. Accordingly the revision petition is allowed by answering the question of law in favour of Revenue and against the assessee. - S.T.R.P. No. 99 of 2010 - - - Dated:- 14-12-2010 - MANJULA CHELLUR AND ARVIND KUMAR, JJ. For the Appellant : Mrs. S. Sujatha, Additional Government Advocate, For the Respondent : T.N. Keshavamurthy ORDER:- The order of the court was made by MRS. MANJULA CHELLUR J. This revision petition pertains to the assessment of financial year 2003-04. The admitted facts in the present revision are as under: The respondent/assessee is dealing in the business of manufacture and sale of various handicrafts items and declared a total sales within the State at ₹ 23,33,778 and had claimed exemption on the entire turnover. In the annual returns filed, it had admitted export sales turnover of ₹ 31,68,480 and had claimed exemption on the entire turnover. The returns came to be filed on May 31, 2004. Subsequently on November 18, 2004, the business premises of the respondent was inspected by intellig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover relating to other inputs and consumable items like polish, hardware items, etc., were not declared, therefore the same was proposed to be estimated at 10 per cent of the value of timber by order dated September 28, 2005. The assessing officer further held that on verification of books of accounts and independent examination of intelligence report, he had a reason to believe that the assessee had indulged in suppression of sales turnover, misclassification of taxable turnover into second sales turnover with the intention of evading taxes payable to the Government and therefore, the assessee had failed to maintain true and complete books of accounts. The assessee preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeal) challenging the orders of the assessing authority. The first appellate authority dismissed the appeals by upholding the correctness of the assessment orders. The respondent/assessee not being satisfied with the said order of the first appellate authority challenged the same before the Karnataka Appellate Tribunal (for short, the KAT ) in STA No. 226 of 2006. The Tribunal by its order dated March 25, 2008 placing reliance on the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of accounts produced and the assessing officer had only disallowed the exemption claimed by the assessee and as such, the Tribunal was justified in relying upon S. G. Jayaraj Nadar's case [1971] 28 STC 700 (SC) to conclude that the penalty cannot be levied. Hence, he submits that revision be dismissed by answering the question of law in favour of the assessee. In support of his submission he relies upon the following judgments: (a) Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 (SC); (b) State of Tamil Nadu v. Suguna Agencies [1991] 81 STC 33 (Mad); (c) S. Durai v. Joint Commissioner (Smr) of Commercial Taxes [1994] 95 STC 372 (Mad); (d) Manager, Text Book Press v. State of Karnataka [2001] 124 STC 303 (Karn); (e) State of Karnataka v. S. R. Agencies [2009] 67 KLJ 349; and (f) State of Karnataka v. Richmond Distilleries [2009] 67 KLJ 351. We have perused the orders of the assessing officer as well as the first appellate authority and the orders of the Tribunal. From the materials placed on record, we note that but for the inspection of the premises of the respondent on November 18, 2004, the misclassification of certain items and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d seek game with the Revenue. An assessee can dishonestly file returns showing turnover far less than what was actually recorded in the account books and challenge the assessing authorities to find for themselves the correct turnover. When eventually the assessing authorities find his correct account books the assessee can rush forward and file revised returns and plead that his dishonest and fraudulent behaviour in filing incorrect and incomplete returns earlier cannot be taken note of because he has filed a correct return after the Revenue officials detected his account books and the correct information. If the provisions of law are clear enough to give protection to such a dishonest assessee, the courts have no say in the matter. If, however, the assessee invites us to interpret the provisions of law in such a way that his dishonesty is rewarded, we would refuse to interpret the provisions to let the dishonest go scot-free. The law should rot be seen to sit by limply while those who defy it to go free. If the courts were to accept interpretation of law to leave the guilty unpunished, the confidence of the public in the efficacy of law would be shaken. The assessee in this case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books. It has almost been conceded on behalf of the Revenue before us that the determination of the turnovers relating to the aforesaid two items was made from the entries in the books of account of the assessee. The true position, therefore, was that certain items which had not been included in the turnover shown in the returns filed by the assessee were discovered from his own account books and the assessing authority included those items in his total turnover. For these reasons the High Court was justified in holding that the assessment of the first and the third items could not be regarded as based on best judgment. The penalty thus could not be levied in respect of those two items. The judgments relied upon by learned counsel for the assessee are analysed as under: In the case Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 (SC), assessee was assessed to tax on the sale of wet grinders under the Tamil Nadu General Sales Tax Act, 1959. Though assessee had claimed that it was selling only parts of wet grinders, its claim was found to be untrue and tax and penalty were imposed for the year 1992-93 and 1993-94. After verifying from the records, it was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the assessment order in question, it is clear that only after verification of the books of accounts and independent examination of the intelligence report, he found the assessee had indulged in suppression of sales turnover, misclassification of taxable turnover into second sales turnover only with an intention of evading taxes payable to the Government. This conclusion of the assessing authority is nothing short of best judgment assessment made by him as there was misclassification of taxable turnover into second sales turnover. The question is whether it is incomplete or incorrect returns. Incomplete returns would be something, which would be short of declaring actual turnover than what is reflected in the account books. Incorrect return would be something which would describe a particular item wrongly in the return whereas the account books would classify it as something else. The question is whether there was any intention to evade payment of tax to the Government taking shelter under a wrong classification. In the present case, the respondent/assessee claims innocence saying that he was under an impression that sales made to the foreigners within the State ..... X X X X Extracts X X X X X X X X Extracts X X X X
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