2019 (3) TMI 340 - HC - VAT and Sales Tax

Imposition of penalty - Deletion of an addition made - detention of goods - probable omissions and suppression - Held that - If, on detection of offence, the transaction was reflected in the books of accounts, that is not a ground to either absolve the liability to penalty or restrain a best judgment assessment - Here there is no explanation offered for the offence which led to the imposition of penalty. The assessee before the A.O merely claimed that they were not even served with the penalty order. If that be so, atleast then, the assessee ought to have taken steps to obtain the order and challenge the same - Nothing seems to have been done even when the statutory appeals from the assessment was pending. The allegation of non-service of penalty order cannot be believed especially when the assessee asserts that the specific goods which were the subject of penalty was entered in the accounts. The question of law answered against the assessee and in favour of the revenue.

Summary

Issues:
1. Deletion of addition made based on detention of goods leading to penalty imposition.
2. Interpretation of law regarding accounting for detained goods in assessment.

Analysis:
1. The judgment revolves around the issue of the deletion of an addition made by the Assessing Officer based on the detention of goods, which resulted in the imposition of a penalty. The Tribunal had deleted the addition after finding that the petitioner had accounted for the said consignment. The First Appellate Authority had initially reduced the addition to 50%. The High Court referred to a previous case, Eskeyef Ltd. v. State of Kerala, where the High Court had interfered with an addition made due to the detention of goods because the goods were declared in the accounts prior to the transport itself. However, in the present case, the facts were different as there was no explanation offered for the offence leading to the penalty imposition.

2. The High Court emphasized that merely reflecting the transaction in the books of accounts after the detection of an offence was not sufficient to absolve the liability to penalty or restrain a best judgment assessment. The assessee in this case had not taken steps to challenge the penalty order, even when statutory appeals were pending. The High Court highlighted that the release of goods after detention would have required the payment of a security deposit, indicating the seriousness of the offence. The Assessing Officer was empowered to carry out a best judgment assessment in such cases, provided the addition made was reasonable. Consequently, the High Court ruled in favor of the revenue, setting aside the Tribunal's order and restoring that of the First Appellate Authority.

In conclusion, the judgment clarifies the legal position regarding the treatment of detained goods in assessments and emphasizes the importance of providing explanations for detected offences to avoid penalties. The decision underscores the authority of the Assessing Officer to make reasonable additions based on best judgment assessments in cases involving detected offences, even if the goods were accounted for after the detection.