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TMI Blog2011 (5) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... amount and not Rs. 15,36,120 which led to issuance of default assessment notice. The assessee explained before the VAT Officer that the assessee was in the business of construction activities on contract basis and, therefore, as per the provisions of section 5(2) of the Act, he had right to disclose the turnover after excluding the charges towards labour, services and other like charges. His explanation was that the charges towards labour, services as well as consumables incurred by the assessee Were deleted from the aforesaid amount of Rs. 61,30,514 thereby arriving at a turnover of Rs. 15,36,120 and, therefore, no default was committed. The figures furnished by the assessee in this behalf are as under:- The turnover disclosed in the return is Rs. 15,36,120, which was arrived at as under:- (1) Work done Rs. 61,30,514 (2) Less:- labour/services Rs. 28,61,766 (3) Less:- consumables Rs. 17,32,629 Rs. 15,36,119 The Value Added Tax Officer, however, confirmed the aforesaid demand and interest and also imposed penalty of Rs. 6,87,232 vide order dated July 18, 2006. Thereafter, the appellant filed the objections before the Objection Hearing Authority (OHA) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as applied by the OHA read with rule 3 of the Rules thereby granting 25 per cent of the total value of the contract of civil work as the expenses incurred, while rejecting the claim for deduction of Rs. 28,61,765 on account of labour/services under rule 3(2) of the Rules. The Tribunal again went into these issues minutely and also took into consideration the order of the OHA and summed up the position in the following manner:- "15. It is significant to note that the appellant has not alleged in this appeal that the learned ward VATO did not correctly submit his report dated June 5, 2007 to the learned OHA. Thus, it is clear that the appellant had merely filed some figures before the ward VATO which clearly shows that the appellant did not avail of the opportunity of establishing it's claim for deduction of Rs. 28,61,765 on account of labour, services and works expenses under rule 3(2) on the basis of the books of accounts. When the appellant was claiming deduction of Rs. 28,61,765 on account of labour, services and works expenses under rule 3(2) from the GTO then it was for the appellant to establish such a claim on the basis of the books of accounts and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts. We do not find any perversity herein. There is no merit in the appeal and the same is accordingly dismissed along with pending applications. S. T. A. No. 3 of 2011 and C. M. Nos. 9437-9437 of 2011:- Admit. The following substantial questions of law arise for consideration:- (1) Whether the Tribunal VAT is correct in observing that the appellant has become liable for action of penalty under section 86 (10)(b) of the DVAT Act, 2004 automatically if the claim of deductions under rule 3(2) of the DVAT rule are denied for which the appellant has recorded the claim in the books of accounts? (2) Whether the penalty becomes automatic under section 86(12) of the DVAT Act, 2004 where there is no tax deficiency at the time of filing of return with its proper claims as per rule 3(2) of the DVAT Rules without showing any deliberate action on the part of the appellant? With the consent of the parties, the matter is heard finally at this stage. This appeal is preferred against the penalty of Rs. 6,87,232 imposed by the Value Added Tax Officer, which is confirmed by the Tribunal in appeal. The penalty was imposed under two provisions of the Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the aforesaid approach of the assessee was bona fide. It cannot be said that the return filed by the assessee was false, misleading and deceptive in material particular. The claim was bona fide may be the assessee was not able to prove the same, even otherwise, we find that it was an arguable case. For this reason, we are of the opinion that the provision to sub-section (10) of section 86 could not be invoked in a matter like this. This condition stipulated therein is not satisfied and we, thus, decide the question of law No. 1 in favour of the assessee and delete the penalty imposed under section 86(10) of the Act. Insofar as the penalty imposed under section 86(12) of the Act is concerned, it is rightly argued by learned counsel for the respondent that the same is compensatory in nature as it recompenses the Department for the tax deficiency. Section 86(12) reads as under:- "86. (12) Where a tax deficiency arises in relation to a person, the person shall be liable to pay, by way of penalty, a sum equal to one per cent of the tax deficiency per week or a sum equal to rupees one hundred per week, whichever is higher, for the period of default." "Tax defici ..... X X X X Extracts X X X X X X X X Extracts X X X X
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