1978 (1) TMI 152 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Justification of maintaining penalties under sections 43(1) and 17(3) after the case was remanded for fresh assessment.
2. Justification of penalties in the circumstances of the case.

Detailed Analysis:

Issue 1: Justification of maintaining penalties under sections 43(1) and 17(3) after the case was remanded for fresh assessment.

The counsel for the assessee argued that penalties under sections 17(3) and 43(1) should be set aside when the assessment is remanded. Sections 17(3) and 43(1) were examined, which indicate that penalties can only be imposed after the tax assessment is completed. The court referenced the Supreme Court's interpretation in Jain Bros. v. Union of India, which established that penalties must be calculated and imposed based on the assessed tax. The court concluded that in this case, the Sales Tax Officer imposed the penalty only after completing the assessment, thus complying with sections 17(3) and 43(1).

The court then considered whether the Appellate Assistant Commissioner was bound to set aside the penalty when remanding the case for fresh assessment. Section 38(5) was analyzed, showing that the Appellate Assistant Commissioner has the discretion to set aside the assessment without necessarily setting aside the penalty. The court found that the reassessment aimed to determine if there was more concealed turnover, not to reduce the existing penalty. Thus, the Appellate Assistant Commissioner was justified in maintaining the penalty order, and the Tribunal was correct in upholding this decision.

Issue 2: Justification of penalties in the circumstances of the case.

The assessee argued that there was no mens rea (guilty mind) in not disclosing the turnover, attributing the mistake to the munim (accountant). The court emphasized that mens rea is necessary for concealment or filing a false return. The Tribunal found that the concealment was deliberate, as evidenced by the significant discrepancy in the turnover figures. The court noted that the assessee could have examined the munim to prove a bona fide mistake but failed to do so.

The assessee also contended that filing a revised return after discovering the mistake should negate the penalty. However, the court pointed out that a revised return under section 17(2) (similar to section 139(5) of the Income-tax Act) cannot benefit someone who knowingly filed a false return. The court cited precedents indicating that penalties could still be imposed for the original false return despite a subsequent revised return. In this case, the revised return was filed only after the Sales Tax Inspector's inspection revealed the concealment, indicating that the initial return was knowingly false.

Conclusion:

The court answered both questions in the affirmative, upholding the penalties imposed under sections 43(1) and 17(3) despite the remand for fresh assessment. The penalties were deemed justified based on the deliberate concealment of turnover and the lack of bona fide error. The assessee was ordered to pay the costs of the reference to the department, with a counsel's fee of Rs. 100.