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TMI Blog1991 (10) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... incorrect and incomplete" and to determine the turnover under section 12(2) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act") to the best of his judgment. In particular he referred to the fact that sales of readymade garments had been wrongly shown as second sales. It is also pointed out that they had not separately shown the taxable turnover of Rs. 42,990. The difference in tax as determined by the assessing authority worked out to Rs. 1,290. It was therefore proposed to levy a penalty of Rs. 1,478 "being 50 per cent of the tax due on the turnover not declared in the return and also for the failure to declare the taxable turnover at 5 per cent". However, while dealing with the objections of the assessee the assessing authority says that section 12(4) and 12(5) of the Act was substituted by the Tamil Nadu Act 47 of 1979 with effect from December 3, 1979. He concludes by saying that the return submitted by the assessee was found to be incorrect and incomplete as per section 12(4)(iii) of the Act and therefore the penalty under section 12(5)(iii) of the Act was attracted. He, therefore, confirmed the levy of penalty at 50 per cent of the tax due on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being exempt and thus avoiding payment of tax on such turnover, loss is caused to the Revenue. Therefore, but for the verification of the accounts by the taxing authorities the loss of revenue could not have been avoided. According to the Revenue it is immaterial whether this mistake on the part of the assessees is bona fide or unintentional. Argues the counsel for the Revenue, that it was precisely the reason why section 12(5) of the Act was introduced in the Act. It would be interesting to note that section 12(4) and 12(5) of the Act was introduced by the Tamil Nadu Act 49 of 1979 with effect from December 3, 1979, sometime after the decision of the Supreme Court in State of Madras v. Jayaraj Nadar Sons [1971] 28 STC 700. It would therefore be appropriate to peruse the said judgment carefully. In that case the assessee returned a turnover of Rs. 42,09,912.12 for the assessment year 1961-62. The assessing authority, on scrutiny of accounts determined the turnover at Rs. 68,06,331.49. The Board of Revenue in suo motu proceedings held that the failure of the assessee to disclose the turnover in question was deliberate and called for no lenient treatment. On appeal, the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le dealing with various assessment orders. There is a line of cases arising out of the Madhya Pradesh General Sales Tax Act, 1958, where the provisions of law is slightly different as will be seen below. In Dadabhoy's New Chirimiri Ponri Hill Colliery Company Private Ltd. v. Commissioner of Sales Tax [1979] 44 STC 100 (MP) the assessee disclosed all the sales made by it during the relevant period. The assessee, however, claimed exemption from payment of tax in respect of sales to electrical undertakings. There was an exemption in respect of sales to electrical undertakings which had not been subsequently incorporated in the Madhya Pradesh Act. A penalty was imposed on the assessee on the ground that it had filed false returns, the falsity being that it claimed exemption in respect of sales to electrical undertakings. It was held that the assessee had taken only a legal plea that the sales to electrical undertakings were not taxable. It was held that the mere fact that the assessee put forward a legal plea in the return, which legal plea could not be sustained, did not amount to making a false return. Though the words used in the Madhya Pradesh Act relate to falsity of returns, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute ...". In Commissioner of Sales Tax v. Shivandas Tekchand [1987] 67 STC 174 (MP) the dealer had shown some purchases under a wrong head and the error was only one of misclassification and not of suppression of any material fact relating to the purchases. It was held that the return could not be said to be false within the meaning of section 43 of the Madhya Pradesh Act. It was held that the dealer did not include a particular item in the taxable turnover under a bona fide belief that he was not liable so to include it. The explanation given by the dealer was found to be plausible and therefore, there was no case for imposition of penalty. 5. We have already noticed the difference between the word "false" used in the Madhya Pradesh Act and the words "incorrect and incomplete" used in the Tamil Nadu Act. The words "false return" connotes certain amount of deliberateness or wilfulness, or an elem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo judgments of this Court arising under the Tamil Nadu Act. The first is in Devendran Co. v. State of Tamil Nadu [1983] 53 STC 229. In that case the assessing authority had not accepted the turnover returned by the assessee. The argument was that section 12(4) and 12(5) of the Act will not apply to such a case. The Division Bench pointed out that the assessee had failed to disclose a huge turnover in the A-2 returns, though it found its place in the accounts. The assessment was completed on the basis of the turnover figures found in the accounts after rejecting the returns. The assessing authority found that there was a discrepancy in the turnover between the book figures and the figures as returned by the assessee. It was therefore a case of assessment based on the account books of the assessee and therefore section 12(4) and 12(5) did apply to the case. The Division Bench interpreting section 12 of the Act held as follows : "A conjoint reading of sub-sections (2), (3) and (4) of section 12 would indicate that section 12(3) will come into operation when no return is filed within the prescribed period, or when the return filed is found to be incorrect or incomplete. But sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 STC 197 which we have extracted above should be kept in mind by the assessing authority. At the risk of repetition we reiterate that the facts of each case have to be carefully analysed before coming to the conclusion whether a particular return is incorrect or incomplete and whether the assessee returned an incomplete or incorrect return, more with a view to postpone the tax legitimately due to the Government, or under a bona fide belief that his return was in accordance with law. 9. Having devoted our attention to the legal principles involved in applying section 12(4) and 12(5) of the Act if we now turn to the facts of the present case we find that there is total confusion of facts on the relevant question whether the assessment was made on the basis of the books of accounts or de hors the books of accounts. In one place the assessing authority says that both the return as well as the books of accounts were incorrect and incomplete. There is a specific reference to the fact that the assessment was to the best of its judgment under section 12(2) of the Act. Towards the end of the order he says that the return was found to be incorrect and incomplete as per section 12(4)(iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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