2018 (4) TMI 648 - HC - VAT and Sales Tax

Revision of assessment order - TNGST Act, 1959 - deletion of addition - penalty restricted from 150% to 50% - case of Revenue is that the Tribunal erred in allowing the appeal on the ground that incriminating records recovered from the residence of one of the partners pertain to the transactions in jewellery and it is not proved by the department that the partner himself did such business. Held that - there is no material irregularity or illegality in appreciation of the evidence, both by the Appellate Authority and Tribunal - Respondent is not a dealer of Silver and Gold Jewellery. Assessing Officer has assessed the turnover, relating to silver and gold, as if they relate to the business of the respondent dealer. There is no perversity in the finding. There is no irregularity or illegality, warranting reversal of the order of the Tribunal. Tax case revision dismissed.

Issues Involved:
1. Legitimacy of assessing turnover based on records found at the partner's residence.
2. Appropriateness of penalty imposition and its quantum.

Detailed Analysis:

1. Legitimacy of Assessing Turnover Based on Records Found at the Partner's Residence:

The respondent, a dealer in electrical goods, was assessed for the year 1992-93 with a total turnover of ?12,67,128/- and taxable turnover of ?0. The assessment included a penalty of ?83,707/- under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959. The respondent appealed, and the Appellate Assistant Commissioner modified the order, reducing the penalty from 150% to 50%.

The state appealed against this modification, arguing that the tribunal erred in allowing the appeal on the grounds that the incriminating records recovered from the residence of one of the partners pertained to jewelry transactions. The state contended that the burden of proof was wrongly placed on the revenue to establish the connection of these records to the respondent's business.

The tribunal, however, noted that the records recovered were related to transactions in gold and silver jewelry, which the respondent denied having any involvement in, as they dealt solely in electrical goods. The tribunal emphasized that the records were found at the residence of a partner, not at the business premises, and there was no corroborative evidence to suggest that the respondent had unaccounted transactions in jewelry.

The tribunal also highlighted that the assessing officer did not conduct a thorough investigation to connect the records to the respondent's business. The tribunal concluded that without proper investigation and corroborative evidence, it was unreasonable to assess the turnover based on these records.

2. Appropriateness of Penalty Imposition and Its Quantum:

The Appellate Assistant Commissioner had reduced the penalty from 150% to 50%, considering that the records were recovered from the residence of a partner, not from the business premises, and that the respondent was not a dealer in gold and silver articles. The tribunal upheld this reduction, stating that the circumstances did not warrant the maximum penalty.

The tribunal referred to various case laws, emphasizing that the imposition of penalty should be based on judicial determination and not automatically imposed. It noted that the quantum of penalty should depend on the gravity of the offense and the circumstances of the case. The tribunal found that the circumstances in the present case did not justify the maximum penalty and that a penalty of 50% was sufficient to meet the ends of justice.

Conclusion:

The tribunal found no material irregularity or illegality in the appreciation of evidence by the Appellate Authority and the Tribunal. It was concluded that the respondent was not a dealer in silver and gold jewelry, and the turnover related to these items could not be attributed to the respondent's business. The tribunal upheld the deletion of the assessment and penalty for both years, stating that the assessment was based on records unrelated to the respondent's regular business. Consequently, the Tax Case Revision was dismissed with no costs.

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