1977 (6) TMI 92 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of turnover for the period between November 22, 1971, and March 31, 1972, in relation to a hotel business.
2. Eligibility of the assessee to be assessed at a compounded rate of tax under section 7.
3. Levy of penalty under section 12(3) for failure to submit an annual return.

Analysis:
The judgment by the Madras High Court involved several key issues regarding the assessment of a hotel business for the year 1971-72. Firstly, the assessing authority determined the turnover for the period between November 22, 1971, and March 31, 1972, at Rs. 46,986.55, and imposed a penalty of Rs. 1,515, later reduced to Rs. 909 by the Appellate Assistant Commissioner. The Sales Tax Appellate Tribunal upheld the addition to the turnover due to accounting discrepancies. The Tribunal also considered the eligibility of the assessee for assessment under section 7, which was initially denied but later granted based on the completion of the assessment for the following year. The Tribunal further addressed the levy of penalty under section 12(3) for failure to submit an annual return, ultimately canceling the penalty due to the absence of a finding of wilful non-disclosure.

Regarding the eligibility of the assessee for assessment under section 7, the Tribunal granted the benefit for the preceding year based on the completion of the assessment for the subsequent year. However, the High Court held that the benefit of section 7 should not retroactively apply to an earlier assessment year if the assessee had not exercised the option for that specific year. The Court emphasized that each assessment year is separate, and the benefit of section 7 should not affect earlier years due to the completion of assessments in reverse order.

On the issue of the levy of penalty under section 12(3), the Court disagreed with the Tribunal's decision to cancel the penalty, noting that the use of the term "suppression" in the assessment order implied wilful non-disclosure. The Court directed the Tribunal to reassess the quantum of penalty and determine whether the initial penalty of Rs. 909 was reasonable based on the facts of the case. Consequently, the Court allowed the tax revision case, remanding the matter for further consideration by the Tribunal.