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2024 (5) TMI 721 - HC - VAT and Sales TaxLevy of penalty under Section 27(3) of the TNVAT Act - requirement of adding gross profit and freight charges to the purchase value - difference between the sales turnover reported by the petitioner and the purchase turnover reported by its customer - violation of principles of natural justice - HELD THAT - There is no finding of wilful non-disclosure of assessable turnover for levy of penalty, independent of the fact, that the turnover was found to have been suppressed resulting in best judgment assessment and levy of tax - The failure to examine / render a finding as to the existence of the jurisdictional fact viz., wilful non-disclosure of assessable turnover vitiates the levy of penalty. There are divergent views expressed by this Court as to whether finding of wilful non-disclosure of assessable turnover is necessary condition precedent for invoking penalty under Section 27(3) of the Act. The Madras High Court in the various judgments had held that finding of wilful non-disclosure of assessable turnover is a condition precedent for invoking penalty under Section 27(3) of the Act and failure to render a finding of wilful non-disclosure of assessable turnover would prove fatal to the levy of penalty. Reliance placed in State of Tamil Nadu v. S. M. Baba Sahib 1977 (10) TMI 93 - MADRAS HIGH COURT where it was held that A wilful non-disclosure of assessable turnover is a necessary ingredient to make out that part of the section, namely, a deliberate intention to suppress an assessable turnover which should, in fact, have existed. It is not possible to say, merely from the fact that there has been a reassessment of escaped turnover on the basis or best judgment, that there has been a wilful nondisclosure of assessable turnover. There must be something to indicate that the turnover did in fact exist and that the assessee had wilfully not disclosed that assessable turnover. The finding of wilful non-disclosure is a sine-qua-non for attracting penalty under Section 27(3) of the Act. Though there may be reasons for making a best judgment assessment, penalty does not automatically follow in all cases of best judgment. In the impugned orders of assessment, there is no finding of wilful non-disclosure of assessable turnover while invoking penalty under Section 27(3) of the Act. Thus, the levy of penalty is without jurisdiction. Finding of Suppression whether adequate to attract Section 27(3) of the Act? - HELD THAT - This Court in the case of P.M.Perianna Pillai vs. The Commissioner, Board of Revenue (C.T.) 1979 (11) TMI 226 - MADRAS HIGH COURT held that finding of wilful non-disclosure is not a formula and mere repetition of the above expressions would not attract levy of penalty. In other words, failure to render a finding on wilful non-disclosure would not prove fatal under all circumstances. On the other hand, it was held that if on perusal of the orders of assessment one is able to discern that there was in fact wilful non-disclosure of assessable turnover, absence of a finding to the said effect may not prove fatal - Applying the above reasoning contained in the case of P.M.Perianna Pillai and on perusal of the assessment orders, one finds that the pre-requisite for invoking Section 27(3) of the act viz., wilful non-disclosure of assessable turnover may not be available in the facts of the present case. The petitioner had discharged the liability only on the basis of the instructions/ suggestions of the Enforcement Wing Officers made during the course of inspection. Thus, it is evident that the assessment orders only states that the reasons put forth by the petitioner for difference between the sales turnover reported by the petitioner vis-a-vis purchase turnover Tvl. Gamesa Wind Turbines Private Limited is not valid. Mere rejection of reasons / explanation for the difference of turnover reported by the petitioner and its purchaser may not necessarily result in concluding that there was wilful nondisclosure of assessable turnover. Method of computation for discharging liability of works contract -within know ledge of the department no suppression - HELD THAT - There is no finding of wilful non-disclosure of assessable turnover which is a condition precedent for attracting Section 27(3) of the Act - Even on reading of the assessment orders as a whole, it is not possible to discern wilful non-disclosure of assessable turnover of the petitioner in view of the fact that the method of accounting adopted / followed by the petitioner was itself suggested / instructed by the revenue - method of accounting adopted by the petitioner which is the reason for the difference between the sales turnover reported by the petitioner vis-a-vis purchase turnover. The impugned orders insofar as the levy of penalty under Section 27(3) of the TNVAT Act are thus set aside, the remaining portions of the impugned orders of assessment dated 21.12.2020 for the assessment years 2009-2010 to 2012-13 remains undisturbed. The writ petition is disposed off.
Issues Involved:
1. Challenge to the levy of penalty under Section 27(3) of the TNVAT Act. 2. Examination of wilful non-disclosure of assessable turnover. 3. Method of accounting and its acceptance by the Enforcement Wing Officers. Summary: 1. Challenge to the Levy of Penalty Under Section 27(3) of the TNVAT Act: The petitioner contested the assessment orders for the years 2009-10 to 2012-13, focusing on the penalty imposed under Section 27(3) of the TNVAT Act. The petitioner argued that the penalty was unjustified as they followed the method of accounting suggested by the Enforcement Wing Officers during inspections. 2. Examination of Wilful Non-Disclosure of Assessable Turnover: The court emphasized that for invoking Section 27(3), there must be a finding of wilful non-disclosure of assessable turnover. The impugned orders lacked such a finding, which is a prerequisite for the penalty. The court referred to previous judgments, highlighting that mere suppression of turnover does not automatically imply wilful non-disclosure. The court noted, "There is no finding of wilful non-disclosure of assessable turnover for levy of penalty." 3. Method of Accounting and Its Acceptance by the Enforcement Wing Officers: The petitioner adopted the method of accounting based on the advice of the Enforcement Wing Officers. The court acknowledged that this method was within the knowledge of the department, thus negating the possibility of suppression. The court stated, "The petitioner had discharged the liability only on the basis of the instructions/ suggestions of the Enforcement Wing Officers made during the course of inspection." Conclusion: The court concluded that the penalty under Section 27(3) was not warranted due to the absence of wilful non-disclosure and the bona fide adoption of the accounting method suggested by the enforcement officers. The impugned orders were set aside regarding the penalty, while the remaining portions of the assessment orders were upheld. The writ petitions were disposed of accordingly.
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