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2021 (1) TMI 245 - HC - VAT and Sales TaxLevy of Penalty under Section 12-A(1-A) of Karnataka Sales Tax Act, 1957 - activity of construction of flats / apartments - works contract entered into prior to commencement of the construction - HELD THAT - From perusal of the order passed by the tribunal, it is evident that in paragraph 10, no particulars of sale agreements alleged to have executed by the petitioner prior to commencement of the work has been mentioned, even though the schedule of payment has been mentioned. The aforesaid finding recorded by the tribunal is based on without any material on record - Similarly, there was no material on record either before the first appellate authority or the adjudicating authority to establish the fact that petitioner has entered into an agreement with prospective buyers prior to commencement of the construction. Therefore, the aforesaid finding has to be termed as perverse. Since, in the relevant Assessment Years the position of law was not clear and therefore, failure of the petitioner to disclose the turnover has to be termed as bonafide based on the prevalent position of law and in the aforesaid factual background, the penal provisions levying penalty could not have been invoked by the authorities. Reliance can be placed in the case of EID. PARRY (I) LTD. OTHERS VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES AND ANOTHER 1999 (12) TMI 708 - SUPREME COURT . The impugned orders passed by the tribunal as well as first appellate authority levying Penalty under Section 12 A(1-A) of the Act are quashed - Revision allowed.
Issues:
1. Interpretation of Section 12-A(1-A) of the Karnataka Sales Tax Act, 1957. 2. Disclosure of turnover by a registered dealer under the Act. 3. Invocation of penal provisions for non-disclosure of turnover. 4. Consideration of bonafide belief based on prevalent position of law. Analysis: 1. Interpretation of Section 12-A(1-A) of the Karnataka Sales Tax Act, 1957: The revision was filed against a judgment by the Karnataka Appellate Tribunal regarding the interpretation of Section 12-A(1-A) of the Act. The petitioner, a registered dealer engaged in construction activities, contested the levy of penalties under this section for non-disclosure of turnover. The court examined the facts and legal provisions to determine the correct interpretation of the law in this regard. 2. Disclosure of turnover by a registered dealer under the Act: The petitioner argued that the turnover was not disclosed due to agreements with prospective buyers being entered into after the commencement of construction, relying on a previous court judgment. The authorities had alleged willful suppression of turnover, leading to penalty demands. The court analyzed the timeline of events, including the commencement certificate, payments made, and agreements signed, to ascertain the disclosure requirements under the Act. 3. Invocation of penal provisions for non-disclosure of turnover: The Assistant Commissioner of Commercial Taxes had imposed penalties on the petitioner for allegedly entering into contracts before commencing construction and willfully suppressing turnover. The appellate authorities upheld these penalties. However, the court found that there was no concrete evidence of agreements being made before construction began. The court considered the bonafide belief of the petitioner based on the prevailing legal position and quashed the penalties imposed, citing a Supreme Court precedent. 4. Consideration of bonafide belief based on prevalent position of law: The court emphasized that in the absence of clear legal clarity during the relevant assessment years, the petitioner's failure to disclose turnover should be viewed as bonafide. The court referred to a legal precedent to support its decision to quash the penalties imposed by the tribunal and the first appellate authority. The judgment highlighted the importance of considering the prevailing legal understanding when evaluating the actions of registered dealers under the Act. In conclusion, the High Court of Karnataka allowed the revision filed by the petitioner, setting aside the penalties imposed for non-disclosure of turnover under Section 12-A(1-A) of the Karnataka Sales Tax Act, 1957.
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