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2008 (11) TMI 642 - HC - VAT and Sales TaxWhether the Tribunal erred in concluding that there was suppression on the basis of B, C and D books especially when the appellant had given an acceptable explanation, and the entries in the books could not be related to sales? Whether in the absence of any finding regarding wilful suppression, the penalty was justified? Held that - In the circumstances, and following the Full Bench decision, Kathiresan Yarn Stores v. State of Tamil Nadu 1978 (4) TMI 210 - MADRAS HIGH COURT relied on by the assessee it is difficult for us to conclude that there has been a wilful concealment. The levy of penalty is not automatic. There should be a finding that there is wilful suppression. The Tribunal was of the opinion that in the line of trade which was carried on by the assessee disposal of goods out of books is normal. Such a conclusion does not satisfy the test laid down by the Full Bench that the degree of proof required for imposition of penalty is of a much higher order than for the purpose of making a best judgment assessment. In these circumstances and on the above facts, the answer to the question No. (1) is answered in the negative and against the assessee and question No. (2) is answered in favour of the assessee and the imposition of levy of penalty is set aside and the tax case (revision) is partly allowed.
Issues Involved:
1. Suppression of turnover based on books B, C, and D. 2. Justification for the imposition of penalty in the absence of wilful suppression. Detailed Analysis: Suppression of Turnover Based on Books B, C, and D: The assessee, a dealer in iron and steel, had discrepancies in the stock reported in books B, C, and D compared to the R.G. 1 register. The Tribunal reviewed these records in detail: - Book B: The Tribunal found a suppression of 39.321 MTs valued at Rs. 2,94,908, as opposed to the 62.596 MTs valued at Rs. 4,68,184 adopted by the assessing officer. - Book C: The Tribunal accepted the assessee's plea that the stock from the previous day in the R.G. 1 register was not considered, leading to a reduction of 6 MTs. The suppression was recalculated at Rs. 11,07,229 instead of Rs. 12,40,818. - Book D: The Tribunal rejected the assessee's explanation. The Tribunal granted partial relief but did not accept the assessee's explanation in totality, considering it a factual finding based on the materials presented. Therefore, the court did not interfere with the Tribunal's decision on this issue. Justification for the Imposition of Penalty: The core question was whether the penalty was justified without a finding of wilful suppression. The learned counsel for the petitioner argued that the discrepancies were due to the approximate recording by less qualified employees and not indicative of suppression. The Tribunal had reduced the penalty to 50% but maintained that some penalty was warranted. The court referred to several precedents: - Kathiresan Yarn Stores v. State of Tamil Nadu [1978] 42 STC 121 (Mad) [FB]: It was held that penalty should only be imposed if there is a clear finding of undisclosed turnover and that the degree of proof required for penalty is higher than for a best judgment assessment. - State of Tamil Nadu v. Thangadurai [1983] 52 STC 279 (Mad): The court held that inability to explain documents does not automatically imply wilful suppression. - State of Tamil Nadu v. S & S Industries [1992] 87 STC 120 (Mad): The Tribunal's discretion in deleting penalties was upheld when there was no wilful suppression. - Commissioner of Sales Tax, U.P. v. Girja Shanker Awanish Kumar [1997] 104 STC 130 (SC): This case focused on the best judgment assessment rather than penalties. The court noted that the Tribunal accepted some of the assessee's explanations and deleted certain alleged suppressions. The Tribunal's inference of suppression based on non-explanation was insufficient for penalty imposition. The court emphasized that penalty requires a finding of wilful suppression, which was absent in this case. Conclusion: The court concluded that there was no wilful concealment by the assessee. The Tribunal's decision to impose a penalty was not supported by the necessary degree of proof. Consequently, the imposition of the penalty was set aside. Final Judgment: - Question 1: Answered in the negative and against the assessee. - Question 2: Answered in favor of the assessee, setting aside the penalty. The tax case (revision) was partly allowed.
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