1978 (10) TMI 138 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of section 43(1) of the Madhya Pradesh General Sales Tax Act, 1958 regarding deliberate furnishing of a false return and imposition of penalty on the assessee.

Summary:
The High Court of Madhya Pradesh addressed a reference made by the Sales Tax Tribunal regarding the deliberate furnishing of a false return by the assessee and the imposition of a penalty. The period in question was from October 1, 1962, to September 30, 1963, during which the assessee claimed exemption for sales to electrical undertakings under the C.P. and Berar Sales Tax Act, 1947, even though such exemption was not provided in the Madhya Pradesh Act. A penalty of Rs. 8,000 was imposed on the assessee for falsely claiming exemption for sales amounting to Rs. 19,18,010.

The assessee argued that the exemption claim was based on legal advice, but failed to provide evidence of such advice. The Tribunal concluded that the assessee knew the exemption claim was not valid, thus filing false returns under section 43(1) of the Act. However, the High Court noted that the sales and turnover were fully disclosed in the returns, and the legal plea for exemption did not render the return false as long as the facts were accurately disclosed. The Court emphasized that a false return is based on false statements of fact, not on legal arguments.

Ultimately, the High Court ruled in favor of the assessee, stating that the Tribunal was not justified in finding the return as deliberately false or imposing a penalty. The Court highlighted that merely presenting a legal argument in a return does not constitute filing a false return. Therefore, the questions raised by the Tribunal were answered in favor of the assessee, with no costs imposed.

Judgment: The High Court of Madhya Pradesh held that the assessee did not deliberately furnish a false return under section 43(1) of the Madhya Pradesh Act and was not liable for the penalty imposed.