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TMI Blog1977 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm reported a gross turnover of Rs. 1,61,379.65 and claimed exemption on the entire turnover. The business premises of the petitioner was inspected by the officers of the Commercial Tax Department on 22nd August, 1972, which led to the recovery of duplicate set of accounts for the period 27th July, 1972, to 21st August, 1972. They also recovered slips of transactions covering the period 27th July, 1972, to 21st August, 1972. Soon after the inspection, the petitioner reported closure of its business on 13th September, 1972. The assessing authority checked the accounts for that year and, on the basis of the material gathered by the officers of the department at the inspection, added a turnover of Rs. 71,089.86 as suppression of sales of liquors. On the ground that the petitioner did not prove that it was a second dealer in respect of the liquor transactions, the assessing authority treated the transactions as first sales within the State and subjected the sales to tax at the appropriate rates. The assessment orders were confirmed, on appeal, both by the Assistant Commissioner as well as by the Appellate Tribunal. The assessing authority issued a notice dated 6th December, 1973, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14(1) says "if the assessing authority is satisfied that any return submitted under section 13 is correct and complete, he shall assess the amount of tax payable by the dealer on the basis thereof ....." It further says "if the return appears to him to be incorrect or incomplete he shall, after giving the dealer a reasonable opportunity of proving the correctness and completeness of the return submitted by him and making such inquiry as he deems necessary, assess to the best of his judgment, the amount of tax due from the dealer ....." In this case, the assessing authority did not accept the return submitted by the dealer, and as the inspection revealed concealment of transactions, a best judgment assessment was made on an estimated turnover. Sub-section (2) of section 14, which is relevant for the purpose of discussion, reads: "(2) When making an assessment to the best of judgment under subsection (1), the assessing authority may also direct the dealer to pay In addition to the tax assessed, a penalty as specified in sub-section (8) on the turnover that was not disclosed by the dealer in his return." Mr. Venkatarama Reddy, appearing for the petitioner, seeks to construe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (8) of the same section, which provides for varying rates of penalty leviable under sub-section (2), sub-section (3), or sub-section (4) of section 14. The proviso has an important bearing on the question of levying penalty under sub-section (2), or sub-section (3), or sub-section (4) of section 14. This proviso lays down: "Provided that where such failure occurred due to a bona fide mistake on the part of the dealer, no such penalty shall be levied." According to Mr. Sastry, the failure to disclose the turnover which the assessing authority added, should be due to a bona fide mistake on the part of the dealer, and if the dealer is not able to satisfy the assessing authority, or the other forums provided under the Act, that it was due to bona fide mistake that the failure to disclose the turnover had occurred, the penal provision, i.e., sub-section (2), is automatically attracted, and penalty would be leviable at the rates provided in clauses (a) and (b) of sub-section (8). Notwithstanding such provisions of the Andhra Pradesh General Sales Tax Act, this Court and the Supreme Court have been consistently laying down certain guidelines in the matter of levy of penalty. The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 of the Indian Incometax Act, 1922, where penalty is provided for concealment of income. Penalty is in addition to the amount of income-tax. This court in Jain Brothers v. Union of India[1970] 77 I.T.R. 107 (S.C.).said that penalty is not a continuation of assessment proceedings and that penalty partakes of the character of additional tax The facts of that case are of course different. That was a case where the assessees under the Central Sales Tax Act were sought to be made liable for penalty under the provisions of the State Sales Tax Act. But the principle stated by the learned Judges there, viz., that penalty is not merely adjunct to assessment, or consequential to assessment, and not merely sanction, applies to all penalty proceedings. Whether there has been a bona fide failure to make a complete disclosure of the turnover, or whether the assessee deliberately or wilfully committed the default, depends upon the facts of each case. The case of the petitioner throughout has been that the accounts which were seized, related to second sales in the State and as such those transactions were not exigible to sales tax. It is true that this plea was rejected by the assessing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se circumstances, it cannot be said that the appellants are second dealers in respect of the suppressed transactions and, therefore, not liable to tax and, consequently, not liable to imposition of penalty ....." Merely because the petitioner had not established that those were second sales, it does not automatically follow that it is liable to pay penalty. The fact that the petitioner was liable to tax does not automatically attract the liability to penalty. The guidelines stated by the Supreme Court in Hindustan Steel Ltd. v. State of Orissa(1) or what was observed in Khemka and Company v. State of Maharashtra(2) have not been borne in mind by the Tribunal. Merely because sub-section (2) of section 14 sanctions levy of penalty on the turnover that was not disclosed by the dealer, penalty cannot be imposed, unless it is found that the petitioner either acted deliberately in defiance of law, or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The finding of the Assistant Commissioner that the department had not made any consequential enquiry to prove that the petitioner had smuggled goods or that the purchases were not local purc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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