2009 (8) TMI 1095 - HC - VAT and Sales Tax

Whether the Tribunal has totally rejected all the relief granted to the assessee by the Appellate Assistant Commissioner and erroneously confirmed the levy of penalty at 150 per cent? Held that - On a careful consideration of the order of the Tribunal, it is clear that but for the inspection conducted by the enforcement wing officials, the suppression could have gone unnoticed and the intention of the assessee to suppress such a huge turnover is clearly established. When such intention is proved beyond reasonable doubt, the findings of the Appellate Assistant Commissioner giving benefit of doubt to the assessee, merely because the opening stocks were not properly taken into account, is unsustainable in law. Per contra, the Tribunal has rightly considered all the relevant materials and set aside the order passed by the Appellate Assistant Commissioner. The Tribunal has also rightly concluded that imposition of 150 per cent of penalty is warranted in the facts and circumstance of the case especially when there is a huge and large scale suppression of the transaction on the part of the assessee. The order of the Tribunal is therefore fully justified. In such circumstance, the question of law raised by the appellant that incorrect reporting of taxable turnover without equal addition was not applicable for the purpose of levy of maximum penalty has to be answered in favour of the Revenue.

Issues Involved:
1. Equal addition as sales suppression due to misclassification, unreasonable profit, incorrect reporting of taxable turnover, and purchase omission.
2. Equal addition as sales suppression when the inspection occurred after the close of the assessment year.
3. Applicability of the benefit of 50% to sales effected from Chennai on the total turnover for the levy of surcharge.
4. Sustainability of penalty on surcharge, additional surcharge, and additional sales tax for the year 1989-90.
5. Imposability of penalty at 150%.

Detailed Analysis:

1. Equal Addition as Sales Suppression:
The Tribunal held that equal addition as sales suppression was justified due to the misclassification of first sales as second sales and incorrect reporting of taxable turnover. The Tribunal found the gross profit of 5.43% for first sales to be unbelievably low, indicating misclassification. The Tribunal determined the levy of tax on the sale value of Rs. 8,27,257 by adding a gross profit of 9.73% to the net purchase value of Rs. 7,53,902. The Tribunal concluded that the suppression of turnover was established beyond doubt, warranting the imposition of a maximum penalty of 150%.

2. Inspection After the Close of the Assessment Year:
The Tribunal noted that the inspection conducted by the enforcement wing officials revealed significant suppression of turnover, which would have gone unnoticed otherwise. The Tribunal emphasized that the inspection and subsequent findings were crucial in uncovering the actual suppression by the assessee. The Tribunal rejected the argument that the inspection's timing invalidated the findings of suppression.

3. Benefit of 50% to Sales Effected from Chennai:
The Appellate Assistant Commissioner had granted the benefit of doubt to the assessee by treating sales made in Chennai beyond the balance of surcharge and additional surcharge levied in the revision of assessment for 1989-90. However, the Tribunal rejected this concession, finding that the assessee failed to disclose the net purchase value during the final assessment, which was only revealed during the inspection and house search. The Tribunal refixed the taxable turnover, including the difference in net purchase value.

4. Sustainability of Penalty on Surcharge and Additional Sales Tax:
The Tribunal upheld the imposition of penalty on surcharge, additional surcharge, and additional sales tax, finding that the assessee's intention to suppress a significant turnover was clearly established. The Tribunal deemed the imposition of a 150% penalty warranted given the large-scale suppression of transactions. The Tribunal found the Appellate Assistant Commissioner's decision to give the benefit of doubt unsustainable in law.

5. Imposability of Penalty at 150%:
The Tribunal concluded that the imposition of a 150% penalty was justified due to the substantial suppression of turnover by the assessee. The Tribunal found that the suppression was intentional and significant, warranting the maximum penalty. The Tribunal's decision to impose the penalty was based on the evidence of suppression uncovered during the inspection and house search.

Conclusion:
The substantial questions of law raised by the assessee were determined to be questions of fact, with no question of law involved. The Tribunal's findings were upheld, and the imposition of a 150% penalty was deemed justified. The tax case was dismissed, with the questions of law answered in favor of the Revenue.

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