2021 (3) TMI 1074 - HC - VAT / Sales Tax

Levy of penalty - Wilful suppression of facts or not - entire amount paid without any objections - HELD THAT - The Tribunal was not right in concluding that there was no willful suppression. Applying the law laid down by the Hon'ble Supreme Court in the case of Mak Data P. Ltd. 2013 (11) TMI 14 - SUPREME COURT would fortify the conclusion arrived - when the Assessing Officer levied penalty 1 times of the tax demanded, the assessee claimed that it was their first year of business. However, that cannot be a sole reason. However, if the assessee is able to show some bona fide reasons, which prevented them from disclosing the full turn over, then the Assessing Officer would be entitled to examine the same for its correctness. The Assessing Officer can be directed to look into the aspect as to whether the penalty can be imposed or not. He shall do so by taking note of the conduct of the respondent prior to the issuance of the pre-assessment notice and during the assessment proceedings. The finding of the Tribunal confirming the imposition of penalty at 1.5 times alone is set aside and the matter is remanded back to the Assessing Officer for a fresh consideration - tax case revision filed by the Revenue is allowed.

Issues Involved:

1. Whether there was willful suppression of taxable turnover by the respondent.
2. Whether the penalty imposed for willful suppression was justified.
3. Applicability of precedents in similar cases.
4. The respondent's right to cross-examine the supplier.

Issue-wise Detailed Analysis:

1. Willful Suppression of Taxable Turnover:
The primary issue revolved around whether the respondent had willfully suppressed taxable turnover. The Department's cross-verification with Hindustan Petroleum Corporation Limited (HPCL) revealed discrepancies between the respondent's reported turnover and actual purchases, indicating incorrect returns with an intention to evade tax. Despite multiple notices, the respondent failed to provide a satisfactory explanation, leading to the conclusion that there was willful suppression. The Tribunal's finding of no willful suppression was deemed incorrect as the respondent did not counter the allegations effectively.

2. Justification of Penalty Imposition:
The penalty, set at 1.5 times the tax demand, was challenged by the respondent, who cited their first year of business and lack of intent to evade tax. The Tribunal's decision to nullify the penalty was criticized as misplaced sympathy. The High Court emphasized that payment of tax in installments post-notice does not negate the act of suppression. The penalty's imposition was supported by the principle that voluntary disclosure does not exempt an assessee from penalty proceedings, as established in the Supreme Court case of Mak Data P. Ltd. vs. Commissioner of Income Tax.

3. Applicability of Precedents:
The respondent relied on precedents from "State of Tamil Nadu Vs. Golden Homes Pvt. Ltd." and "Balaji Floor and Wall Tiles Vs. State of Tamil Nadu," which were found distinguishable. These cases involved revisions of assessments following inspections, unlike the regular assessment in the present case. The decision in "Surya Service Station" was more pertinent, where similar arguments were rejected, reinforcing that the burden of proof lies with the dealer.

4. Right to Cross-Examine the Supplier:
The respondent contended that they should have been allowed to cross-examine HPCL officials to verify purchase details. This plea was rejected, aligning with the precedent in "M/s. Surya Service Station Vs. The Appellate Assistant Commissioner," where reliance on supplier records without cross-examination was upheld.

Conclusion:

The High Court allowed the tax case revision filed by the Revenue, answering the questions of law in favor of the Revenue. The Tribunal's finding on the penalty was set aside, and the matter was remanded to the Assessing Officer for reconsideration, focusing on the respondent's conduct before and during the assessment proceedings. The decision underscored that the burden of proof remains with the dealer, and voluntary compliance post-notice does not absolve the penalty for willful suppression.

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