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2018 (4) TMI 371 - HC - VAT and Sales TaxAssessment of turnover - penalty u/s 12(3)(b) of the Act - Held that - Section 12(3)(b) of the Act deals with, submission of incorrect or incomplete return and for the purpose of levy of penalty - There is no suppression in the books of accounts and this fact has been categorically stated by the appellate authority, in his order, in which event, the assessee is entitled to invoke explanations (i) and (ii) to Section 12(3)(b) of the Act - revision dismissed - decided against Revenue.
Issues Involved:
1. Assessment of Turnover 2. Levy of Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 Issue-wise Detailed Analysis: 1. Assessment of Turnover: The case revolves around the assessment of the turnover of a dealer, who is a manufacturer of welding electrodes. The Assessing Officer found discrepancies in the dealer's accounts, particularly regarding the non-reporting of purchases amounting to ?9,81,113/- and the sale of machinery worth ?4,72,000/-. Consequently, the Assessing Officer assessed the dealer on a total and taxable turnover of ?25,52,134/- and ?20,80,134/- respectively, for the year 1996-97, and levied a penalty of ?1,32,252/- under Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959. The dealer appealed against this assessment, disputing the turnover and penalty. The Appellate Assistant Commissioner upheld the assessment, stating that the dealer's claim of incurring heavy losses was not supported by evidence. The Commissioner agreed with the Assessing Officer's estimation of the turnover and the adoption of a 31% Gross Profit margin, finding no merit in the dealer's contentions. Upon further appeal, the Tamil Nadu Sales Tax Appellate Tribunal modified the assessment. The Tribunal noted that the dealer's claim of second sales amounting to ?9,81,132.77 was not believable and upheld the Assessing Officer's finding that these purchases were used in manufacturing. However, the Tribunal adjusted the Gross Profit margin to 20%, thereby recalculating the taxable turnover to ?18,69,653/-. 2. Levy of Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959: The primary contention regarding the penalty was whether it was justifiable under Section 12(3)(b) of the Act. The Tribunal initially deleted the penalty, holding that the estimation of sales turnover was based on the book purchase turnover, and there was no omission found by the Assessing Officer. The Tribunal cited several Supreme Court decisions, including *State of Madras v. Jayaraj Nadar* and *Hindustan Steel Ltd.*, to support its decision that penalty is not leviable when figures are derived from the books of accounts. The State challenged this deletion, arguing that the penalty should be automatic under the amended provisions of Section 12(3)(b) when there is a balance of tax payable. The State also noted that a Special Leave Petition on a similar issue was pending before the Supreme Court. The High Court, in its analysis, referred to several precedents, including *Appollo Saline Pharmaceuticals (P) Ltd. v. Commercial Tax Officer* and *Indira Industries v. State of Tamil Nadu*, which established that penalty under Section 12(3)(b) is not warranted when the assessment is based on the dealer's books of accounts and there is no specific concealment of turnover. The Court emphasized that the best judgment assessment involves an element of estimation and guesswork, which does not justify the imposition of a penalty if based solely on the dealer's accounts. Ultimately, the High Court dismissed the Tax Case Revision petition filed by the State, affirming that the penalty was not justifiable as there was no suppression in the books of accounts. The Court concluded that the substantial question of law was answered in favor of the assessee, and no costs were awarded.
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