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2016 (10) TMI 601

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..... other words, no serious exception has been taken thereto at the first instance. But, it is subsequent thereto, the scrutiny has been undertaken. There should have been a specific finding recorded by the AO that the turnover that has escaped in the first and initial round of assessment, is the result of wilful non-disclosure or suppression by the dealer. There is no such finding recorded in the Revised Assessment Order dated 30.11.2012. A proper and careful quasi-criminal exercise of imposition of penalty has not been carried out by the AO. The finding of wilful non-disclosure/suppression of turnover is the condition precedent, which alone fetches the imposition of penalty is conspicuous by its absence in the order of reassessment. In the absence of any such finding, imposition of penalty could not be lawfully carried out. Petition dismissed - deletion of penalty justified - decided in favor of respondent-assessee. - Tax Case Revision Petition No. 24 of 2016 - - - Dated:- 14-9-2016 - Nooty Ramamohana Rao And P. Devadass, JJ. For the Petitioner : Mr. S. Kanmani Annamalai For the Respondent : Mr. P. Rajkumar ORDER [ Judgment of the Court was delivered by No .....

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..... ed 30.11.2012 came to be passed. He levied tax at the rate of 4% on this disputed amount of ₹ 1,30,81,453/- and the tax due of ₹ 5,23,258/- was demanded. Penalty is also levied at the rate of 150% on the tax due, which works out to ₹ 7,84,887/- The appeal preferred there against has been dismissed, by order dated 17.06.2013 by the Appellate Deputy Commissioner, Commercial Tax. Thus, came to be instituted a further Appeal before the Sales Tax Appellate Tribunal, which by its order dated 14.10.2014, while confirming the levy of the tax amount, has set aside the penalty imposed. Thus, giving rise to the present revision. 5. Heard Mr.S.Kanmani Annamalai, learned Additional Government Pleader for Commercial Tax as well as Mr.P.Rajkumar, learned counsel for the respondent/dealer/assessee. 6. It is mainly contended by the learned counsel for the State that levy of penalty is a consequence upon the revision of tax liability, upon detection of escaped turnover, pursuant to inspection carried out by the Enforcement Agency. Hence, the penalty levied, as allowed by the Statute ought not to have been interfered with by the Tribunal. 7. Per contra, the learned counsel .....

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..... se [supra] this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose. It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of a quasi-criminal proceedings: [Hindustan Steel Ltd. v. The State of Orissa]. In England also it has never been doubted that such proceedings are penal in character; Fattorini [Thomas] [Lancashire] Ltd. v. Inland Revenue Commissioner. 5. The next question is that when proceedings under Section 28 are penal in character what would be the nature of the burden upon the department for establishing that the assessee is liable to payment of penalty. As has been rightly observed by Chagla, C.J., in Commissioner of Income-tax, Ahmedabad v. Gokuldas Harivallabhdas the gist of the offence under Section28[1][c] is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and therefore the department must establish that the receipt of the amount in dispute co .....

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..... b-section (1) under Section 27 of the Act makes it clear that for any reason where the whole or part turnover of the business of a dealer has escaped the assessment to tax, the Assessing Authority at any time within a period of five years from the date of assessment determine to the best of its judgment the turnover which has escaped assessment and assess the tax payable on such turnover after making such enquiry as it may consider necessary. Sub-section (2) under Section 27 of the Act dealt with a situation, where input tax credit has been either wrongly levied or availed or where the dealer has produced false bills, vouchers, declaration certificate or other documents with a view to support his claim of input tax credit or refund, the Assessing Authority shall at any time within a period of five years from the date of order of assessment, reverse the input tax credit availed and determine the tax due after making such enquiry. Sub-section (4) under Section 27 of the Act clearly brings out that in addition to the tax determined under Sub-section (2), the Assessing Authority shall direct the dealer to pay as penalty a sum which shall be, in the case of first detection, 50% of .....

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..... 27 of the Act, therefore, requires, such a clear finding as a condition precedent for exercise of power available thereunder. The finding that the Assessing Officer is satisfied about the non-disclosure of turnover by the dealer also requires a specific finding that such non-disclosure is a wilful one, which observation is alone essential for imposition of a penalty. 14. In the instant case, the books of accounts maintained by the dealer did contain the factum of his making payment towards purchase of earth, its supply, spreading, consolidating and compacting it into specific layers at the site of work, where construction of a residential project was undertaken to be developed. It is true that it is the Enforcement Wing officials of the Department who have detected that the dealer/assessee has paid Sri.A.Ashok Kumar, an unregistered dealer, a little more than ₹ 1.18 Crores towards purchase of earth, its spreading, levelling and compacting exercise at the project site, but no tax is paid thereon. It is, therefore, they who brought out that the said amount has not been subjected to tax, particularly, when the earth has been procured from an unregistered dealer. 15. In th .....

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..... und that the payment made to Sri.A.Ashok Kumar is in fact reflected in the books of accounts maintained by the respondent dealer in the ordinary course of business, and thus, there is no wilful suppression of any such expenditure, indulged in by the dealer/assessee. At the first round of assessment, in fact it has escaped the attention of the Assessing Officer. In other words, no serious exception has been taken thereto at the first instance. But, it is subsequent thereto, the scrutiny has been undertaken. 18. In these set of circumstances, we are of the opinion that there should have been a specific finding recorded by the Assessing Officer that the turnover that has escaped in the first and initial round of assessment, is the result of wilful non-disclosure or suppression by the dealer/assessee. There is no such finding recorded in the Revised Assessment Order dated 30.11.2012. We are, hence, of the view that a proper and careful quasi-criminal exercise of imposition of penalty has not been carried out by the Assessing Officer. The finding of wilful non-disclosure/suppression of turnover is the condition precedent, which alone fetches the imposition of penalty is conspicuous b .....

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