2019 (11) TMI 418 - HC - VAT and Sales Tax

Enhancement of turnover tax - suppression of turnover - Best judgement assessment - power to do re-assessment - HELD THAT - Section 39(1) of the Act empowers the Prescribed Authority to do the re-assessment where the Prescribed Authority has grounds to believe that any return furnished which is deemed as assessed or any assessment issued under Section 38 of the Act understates the correct tax liability of the dealer - It may, based on any information available, re-assess, to the best of its judgment, the additional tax payable and also impose any penalty under sub-section (2) or sub-sections (4) and (5) of Section 72 of the Act and demand payment of any interest and shall issue a notice of re-assessment to the dealer demanding that the tax shall be paid within 30 days of the date of service of the notice after giving the dealer the opportunity of showing cause against such re-assessment in writing. It is not in dispute that the Assessee has admitted the suppression of turnover at the time of the Enforcement Authority inspecting the business premises of the Assessee. It is not once, but on two occasions the business premises of the Assessee was inspected. On both the occasions, it was detected by the Enforcement Authority that the Assessee had indulged in the practice of not accounting the sales in the regular books of accounts - The conduct of the Assessee in not maintaining the regular books of accounts would be good ground for the Prescribed Authority to enhance the turnover including the deficit in stock noticed at the time of inspection. The questions of law raised by the petitioner requires to be answered against the Assessee and in favour of the Revenue. Levy of penalty u/s 72(2) of the Act - HELD THAT - The penalty levied at ₹ 1,00,631/- under Section 72(2) of the Act requires to be re-considered in view of the return filed by the petitioner for the tax period September, 2013 disclosing the sales turnover detected by the enforcement authority. Hence, penalty under Section 72(2) of the Act has to be redetermined by the Assessing Authority - matter remanded to the Prescribed Authority to redetermine the penalty levied under Section 72(2) of the Act. Decided partly against assessee and part matter on remand.

Summary

Issues:
1. Treatment of suppressed sales and addition of equal value.
2. Treatment of stock difference as suppressed turnover.
3. Correctness of penalty levied under Section 72(2).
4. Upholding of additions to turnover and penalty by JCCT Appeal.
5. Dismissal of appeal by Karnataka Appellate Tribunal.

Issue 1: The petitioner challenged the treatment of suppressed sales amounting to ?43,80,076 and the addition of equal value by the DCCT (Audit)-2 DVO, Kalaburagi. The court noted that the Assessee admitted the suppression of turnover during inspections, and the Enforcement Authority found incriminating evidence of unaccounted sales. The Prescribed Authority acted within its powers under Section 39(1) of the Act to assess the additional tax payable based on available information. The court upheld the treatment of suppressed sales and the addition made by the authorities.

Issue 2: The Assessee contested the treatment of stock difference as suppressed turnover by the DCCT (Audit) 2 DVO, Kalaburagi. The court observed that the Enforcement Authority detected discrepancies in the closing stock, indicating improper accounting practices. The Prescribed Authority's power to assess the correct tax liability through best judgment was justified based on the unaccounted turnover and stock discrepancies. The court upheld the addition of stock difference to the turnover as deemed fit by the authorities.

Issue 3: The legality of the penalty levied under Section 72(2) was questioned by the Assessee. The court acknowledged that the Assessee disclosed the unaccounted turnover detected during inspections in the returns filed. Considering this, the court directed the Assessing Authority to re-evaluate the penalty amount under Section 72(2) based on the submitted returns. The court remanded this specific issue to the Prescribed Authority for reconsideration.

Issue 4: The Assessee appealed the JCCT Appeal's decision upholding the additions to turnover and penalty. The court reviewed the facts and circumstances, affirming the Prescribed Authority's actions in enhancing the turnover and imposing penalties based on the detected discrepancies and unaccounted sales. Except for the penalty aspect under Section 72(2), the court upheld the decisions of the authorities.

Issue 5: The Assessee challenged the dismissal of the appeal by the Karnataka Appellate Tribunal. The court examined the grounds raised by the Assessee and found that the Tribunal's decision was justified based on the evidence and legal provisions. The court upheld the Tribunal's order, except on the specific issue of penalty re-evaluation under Section 72(2), which was remanded for further consideration by the Prescribed Authority.