2009 (8) TMI 1085 - HC - VAT and Sales Tax

Whether, in the facts and circumstances of the case, the Tribunal was right in having reduced the further addition at ₹ 5,54,800 to ₹ 27,586 on the ground that the assessee had paid huge amount of compounding fee for not carrying the bill is legally sustainable? Whether the reduction of second penalty by the Tribunal is valid in law? Held that - The assessing officer, apart from accepting the turnover as reported by the assessee, proceeded to make an assessment of the suppression by making an estimation. In that process, since the quantity of excess stock was quantified at 4.270 kgs of silver anklets and the transportation of the silver anklets without bills was also available to the exact quantity, namely, 40.140 kgs, the assessing officer was able to value those items which worked out to a sum of ₹ 5,54,800. To that extent, the action of the assessing officer cannot be in any way faulted, but the assessing officer proceeded further and made an equal addition of the suppression and estimated it at ₹ 5,54,800 and the total suppression was thus arrived at ₹ 11,09,600 to which the taxable turnover reported by the assessee was added and the total taxable turnover was estimated at ₹ 15,98,191. When the aid action of the assessing officer was examined by the Tribunal, the Tribunal, at the outset, noted that there was no incident of the assessee carrying goods without any bills in the past. Thus such an approach made by the Tribunal was perfectly justified and consequently, the scaling down of the amount towards probable omission from ₹ 5,54,800 to ₹ 27,586 by the Tribunal does not call for any interference as we do not find any legal or serious irregularity in the said approach of the Tribunal. The tax case is accordingly dismissed answering the questions of law raised in this case against the State

Summary

Issues involved:
1. Reduction of compounding fee by the Tribunal.
2. Validity of reduction of the second penalty by the Tribunal.

Analysis:
1. The case involved a challenge to an order passed by the Sales Tax Appellate Tribunal regarding the reduction of further addition and compounding fee for not carrying bills by the assessee. The enforcement officials found discrepancies during an inspection, leading to a total and taxable turnover determination. The assessing authority added an equal amount towards probable omissions, resulting in a penalty. The Tribunal reduced the compounding fee and equal addition based on the stock discrepancy noted during inspection. The State contended that no further indulgence should have been shown to the assessee, citing previous legal decisions. The assessee argued against the equal addition, emphasizing the assessing authority's best judgment assessment guidelines. The High Court analyzed the Supreme Court's guidelines on reassessment and best judgment assessments, concluding that the Tribunal's decision to scale down the probable omission amount was justified due to the lack of a continuous suppression pattern by the assessee. Therefore, the Tribunal's decision was upheld, and the tax case was dismissed against the State.

2. The second issue pertained to the validity of the reduction of the second penalty by the Tribunal. The State argued that the reduction was unwarranted given the compounding fee and tax liability, emphasizing the need to prevent falsification of accounts. In contrast, the assessee relied on legal precedents highlighting the assessing authority's obligation to make a fair estimate without acting vindictively. The High Court examined the assessing officer's actions in quantifying the suppression and making an equal addition, ultimately agreeing with the Tribunal's decision to scale down the probable omission amount. The Court found no legal irregularity in the Tribunal's approach and dismissed the tax case against the State, ruling in favor of the assessee.