2001 (2) TMI 1019 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the reassessment under section 14(4) versus section 14-B of the Andhra Pradesh General Sales Tax Act, 1957.
2. Validity of the penalty levied under section 14(8) for wilful suppression of sales turnover.
3. Reliance on findings from assessment proceedings in penalty proceedings.

Detailed Analysis:

1. Legality of the Reassessment under Section 14(4) versus Section 14-B:
The primary contention by the petitioner was that the reassessment notice issued by the Deputy Commissioner should have been under section 14-B of the Act, which was not applicable as it was inserted with effect from July 1, 1985, and the assessment year in question was 1981-82. The petitioner argued that the reassessment under section 14(4) was illegal and unsustainable because section 14-B specifically dealt with cases where sales were shown at a price lower than the market price to evade tax.

However, the court found that section 14(4) was applicable as it covers scenarios where any part of the turnover has escaped assessment or has been under-assessed. The Deputy Commissioner had ignored the sales to M/s. Bhanu Enterprises as they were deemed colourable transactions intended to evade tax. Thus, the reassessment under section 14(4) was deemed appropriate.

2. Validity of the Penalty Levied under Section 14(8):
The Deputy Commissioner levied a penalty of Rs. 60,936 under section 14(8) of the Act, asserting wilful suppression of sales turnover. The petitioner contended that the penalty was based on reassessment under section 14-B, which should not apply retrospectively.

The court upheld the penalty, noting that the transactions between the petitioner and M/s. Bhanu Enterprises were colourable and intended to avoid tax liability. The reassessment findings, which included the suppression of turnover, justified the penalty under section 14(8) for wilful suppression.

3. Reliance on Findings from Assessment Proceedings in Penalty Proceedings:
The petitioner argued that the findings from the assessment proceedings should not influence the penalty proceedings, as they are independent processes. The petitioner relied on the judgment in Delux Wines v. State of Andhra Pradesh, which held that actions under section 14(4) should be under section 14-B if sales were at a lower rate than the market price.

The court distinguished the present case from Delux Wines, noting that the reassessment ignored the sales to M/s. Bhanu Enterprises as they were colourable transactions. The court held that the findings from the assessment proceedings were relevant as they demonstrated wilful suppression of turnover. The petitioner did not file any objections to the show cause notice for the penalty, further supporting the penalty's validity.

Conclusion:
The court dismissed the tax revision case, affirming that the reassessment under section 14(4) was appropriate and the penalty under section 14(8) was justified due to wilful suppression of sales turnover. The findings from the assessment proceedings were applicable to the penalty proceedings, as the petitioner failed to provide any counter-evidence. The petition was dismissed, and the penalty confirmed.