1965 (7) TMI 42 - HC - VAT and Sales Tax

Summary

Issues:
1. Jurisdiction of a succeeding authority to levy penalty after a lapse of two years.
2. Interpretation of penalty provision under sub-section (3) of section 12.
3. Requirement for penalty to be levied as part of an assessment order.
4. Consideration of penalty in the absence of mention in the assessment order.

Analysis:
1. The case involved a dispute regarding the jurisdiction of a succeeding authority to levy a penalty after a lapse of two years. The assessing authority for the subsequent year reopened the earlier assessment order and proposed a penalty for the noninclusion of sales turnover in the monthly returns. The assessee objected to the penalty on the grounds of jurisdiction and legality. The Appellate Assistant Commissioner upheld the penalty, albeit at a reduced amount. The Tribunal, in a majority decision, held that the penalty was without jurisdiction and illegal, leading to the State filing a revision in the High Court.

2. The High Court analyzed the penalty provision under sub-section (3) of section 12, which allows the assessing authority to direct the dealer to pay a penalty not exceeding one and a half times the tax due on the undisclosed turnover. The Court emphasized that the levy of penalty is intertwined with the assessment process under sub-section (2), which requires the assessing authority to complete the assessment on a best judgment basis when the return is incomplete or incorrect. The Court highlighted that the penalty provision is contingent upon a finding of incompleteness or incorrectness in the submitted return and is part of the assessment proceedings.

3. The Court clarified that penalty under sub-section (3) must be levied as part of the assessment order and not as a separate or independent inquiry. It emphasized that the decision to levy a penalty should be made concurrently with the best judgment assessment, as both processes are quasi-judicial in nature and are part of the same enquiry. The Court rejected an interpretation from a previous case that suggested a separate inquiry for the imposition of penalties, reiterating that penalty can only be levied as an integral part of the assessment order.

4. Additionally, the High Court considered the absence of any mention of penalty in the assessment order for the relevant year. It noted that the assessing authority, aware of the best judgment assessment being made, did not find it necessary to levy a penalty due to the circumstances surrounding the discrepancy in turnover figures. The Court held that if the assessing authority did not include a penalty in the assessment order, it implied a conscious decision not to levy a penalty. Consequently, the succeeding authority had no jurisdiction to independently reopen the assessment order or impose a penalty, leading to the dismissal of the revision petition.