1982 (2) TMI 286 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Imposition of penalty under section 15-A(1)(c) of the U.P. Sales Tax Act.
2. Rejection of dealer's accounts and determination of turnover by estimate.
3. Consideration of evidence from subsequent years in penalty proceedings.
4. Burden of proof and requirement of independent material for penalty imposition.

Detailed Analysis:

1. Imposition of Penalty under Section 15-A(1)(c) of the U.P. Sales Tax Act:
The applicant-dealer challenged the imposition of a penalty of Rs. 1,800 for the year 1977-78 under section 15-A(1)(c) of the U.P. Sales Tax Act. The penalty was initially set at Rs. 2,800 by the assessing authority, reduced by the Assistant Commissioner (Judicial) to Rs. 1,800, and upheld by the Sales Tax Tribunal. The penalty was based on the alleged concealment of sales, specifically a sale of a steel box for Rs. 400 not recorded in the account books nor supported by a cash memo.

2. Rejection of Dealer's Accounts and Determination of Turnover by Estimate:
The dealer's accounts were rejected during the assessment proceedings for the year 1977-78, and the turnover was determined by estimate. This decision was upheld in the first appeal by the Assistant Commissioner (Judicial), who slightly reduced the taxable turnover, and subsequently affirmed by the Sales Tax Tribunal in the second appeal. The rejection was based on a survey conducted on 23rd April 1977, where a diary entry for a sale of Rs. 400 was found unrecorded in the account books.

3. Consideration of Evidence from Subsequent Years in Penalty Proceedings:
The dealer argued that facts from a survey conducted on 7th August 1978, which found more workmen than declared, should not be considered as they pertained to a subsequent year. The court agreed, stating that the survey from 7th August 1978 was not relevant to the year in question (1977-78). Therefore, the Tribunal's order partly based on this irrelevant consideration could not be sustained.

4. Burden of Proof and Requirement of Independent Material for Penalty Imposition:
The court referenced the Supreme Court's decision in Commissioner of Income-tax v. Anwar Ali, emphasizing that penalty provisions are penal in nature, and the burden of proof lies on the department to establish concealment of turnover with material evidence independent of the disbelieved explanation. The court observed that the authorities did not provide material independent of the assessment proceedings to justify the penalty. The Assistant Commissioner (Judicial) and the Tribunal based their conclusions on the same material used during the assessment proceedings, without any independent consideration.

Conclusion:
The court concluded that since the authorities did not independently assess material other than what was available during the assessment proceedings, the penalty order could not be sustained. The revision was allowed, and the penalty imposed on the dealer was set aside. Each party was directed to bear their own costs.