2012 (10) TMI 962 - HC - VAT and Sales Tax

Penalty on non-registration of the business run by the revision petitioner - Held that - The appellate tribunal has conscientiously examined the case and come to the conclusion that the adoption of turn over by the Intelligence Officer is based on valid documents recovered from the business premises of the revision petitioner and was also based on the Income Tax returns and the profit and loss statement appended to such returns. The alleged suppression has been found to be one eminently emanating from the materials on record. This court does not find any reason to interfere with the factual findings recorded by the Tribunal. The learned counsel makes a passionate plea for reduction of the quantum of penalty imposed. We find that the first revisional authority has modified the penalty imposed considerably, a measure of indulgence which we would say was misplaced. But the State having not challenged it, we are of the opinion that the facts and circumstances does not compel us to make any further modifications. Sales tax revision rejected.

Summary

Issues:
Challenging penalty orders for non-registration of business and tax evasion; Questions of law raised against Tribunal's orders; Allegations of evasion based on income tax returns; Discrepancies in turnover reported; Allegations of suppression of taxable turnover; Appeal for reduction of penalty; Verification of books of accounts; Compounding scheme under KGST Act; Lack of registration under KGST Act.

Analysis:
1. The revisions were filed against penalty orders issued for non-registration of the business and tax evasion. The Tribunal's common orders for the years 1998-99 to 2003-04 were challenged, along with a separate order for 2004-05. The revision petitioner raised questions of law regarding the failure to verify their books of accounts, entitlement to pay tax under the compounding scheme, and the basis for the proceedings leading to the alleged suppression of taxable turnover.

2. The revision petitioner operated a business under a specific name and claimed it involved only lending of compact discs, which they argued was not taxable or fell below the prescribed turnover limit. However, discrepancies arose regarding tax payments made without registration or permission. The main argument was that assessments were made without verifying the petitioner's books of accounts, which were held by a Criminal Court. The Tribunal's order was challenged for factual errors and perversity in appreciating the facts.

3. The Intelligence Wing of the Commercial Taxes Department discovered a pattern of evasion through income tax returns, leading to penalty proceedings under Section 45A. The revision petitioner's profit and loss accounts and turnover figures were scrutinized, with discrepancies noted in the reported turnover and income. The evasion allegations were based on the income conceded before the Income Tax authorities and the turnover reported by the petitioner.

4. For the year 2004-05, significant turnover suppression was detected from the purchase and sale of video rights of films. Despite objections and claims of marketing projections, substantial tax evasion was identified based on recovered documents and agreements with distributors. The revisional authority reduced the penalties imposed, which were upheld by the Tribunal.

5. The revision petitioner's plea for a remand based on the books of accounts held by the Criminal Court was dismissed, as the verification revealed no relevant financial records. The lack of verification and the contradictory claims regarding tax compounding and registration under the KGST Act weakened the petitioner's case.

6. The Tribunal's findings, based on valid documents and income tax returns, were upheld by the Court. The alleged suppression of turnover was deemed substantiated by the materials on record. Despite a plea for a reduction in penalties, the Court found no compelling reason to modify the Tribunal's decision. The revisions were rejected, with no costs awarded.