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TMI Blog2018 (5) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase suppression of Rs. 5,21,339/-. But the respondent had shown the closing stock as per trading account, for the year 1994-95 on Rs. 11,22,716/-. Therefore, the assessing authority had arrived at the sales suppression and the estimated sales suppression and levied tax on the respondent and also penalty of Rs. 1,22,796/-, under Section 12(3)(b) of TNGST Act, 1959. 3. Aggrieved over the assessment, the dealer, filed an appeal in A.P.No.60 of 1997, before the Appellate Assistant Commissioner (CT), Coimbatore, disputing the 1% addition made for defects; estimation of alleged actual suppression of Rs. 6,15,180/-; the equal addition of Rs. 6,15,180/- for estimated suppression and levy of penalty, stating that the stock variation had been arrived at notionally, and there was no purchase or sales omission and therefore, there was no actual suppression and that there could not be another estimation, as the stock variation had been arrived at, from 04.03.1994 to 31.03.1995. It was further contended that the entire period of assessment has been taken and therefore, there is no necessity for estimated suppression. Considering the facts and circumstances of the case, the Appellate Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enumerated vide (i) to (iii) of page 2 of assessment order are material defects warranting addition. Hence, I sustain the 1% addition made to book turnover. In fine, the appeal is modified." 4. Being aggrieved the same, the respondent has preferred C.T.A.No.463 of 1997, before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, along with connected appeals. While confirming the order passed by the Appellate Assistant Commissioner in sustaining the actuals, after deleting the addition made for probable omission, the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, vide order, dated 16.12.2002, set aside the penalty imposed under Section 12(3)(b), as hereunder: "6. We have heard the arguments of both the sides and perused the connected records. The learned Additional State Representative would argue to sustain the order of the Appellate Assistant Commissioner stating that in the absence of detailed closing stock inventory or day-today stock account; the Assessing Officer has no other alternative but to arrive at the sales suppression on the basis of the figures found therein in the accounts. Thus, he would argue that the actual sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Nil Total Rs.8,38,874-00 Less: Purchases value of the goods sold from 4.3.94 to 31.3.94 Rs. 2,80,247 * 100/118 Rs.2,37,497-00 Closing stock to be Rs.6,10,377-00 Closing stock declared as per books Rs.11,22,716-00 Excess being purchase suppression Rs.5,21,339-00 Suppressed turnover proposes and assessed: Actual suppression as worked out above Rs.6,15,180-00 Add: Equal amount for estimated suppression Rs.6,15,180-00 Total suppression worked out for 94-95 Rs.12,30,360-00@16% 9. On first appeal, the learned Appellate Assistant Commissioner sustained the actual suppression estimated (Stock variation) since the entire turnover stock from 1.4.94 to 4.3.94 has been taken and the sales suppression has been arrived but he has deleted the equal addition made in the assessment as unwarranted. However, he has sustained 1% addition made for defects for the assessment year 1994-95 in respect of both the appeal. 10. The issue involved in the above appeals are as follows: CTA No.462/97 (1993-94): i. Turnover disputed : Rs.5,52,697/- at 16% ii. Penalty u/s.16(2) : Rs.1,64,980/- CTA No.463/97 (1994-95) i. Turnover dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at purely on notional basis only. Moreover, the learned first appellate authority after considering the factual position, deleted the equal addition made for probable omission and thereby sustained the actuals. Therefore, we are of the view that the order passed by the learned Appellate Assistant Commissioner in sustaining the actuals after deleting the addition made for probable omission, is found to be in order and hence it calls for no interference. Therefore, the turnover so modified and adopted by the learned Appellate Assistant Commissioner is hereby confirmed. Issue No.II(Penalty): CTA 462/97 Penalty levied u/s.16(2) Rs. 1,64,980/- CTA 463/97 Penalty levied u/s.12(3)(b) Rs. 1,22,796/- CTA 465/97 Penalty levied u/s.16(2) Rs. 1,64,465/- CTA 464/97 Penalty levied u/s.12(3)(b) Rs. 1,08,361/- 12. With regard to the levy of penalty, the learned Authorised Representative would argue that the first appellate authority has erred in sustaining the penalty on the turnover confirmed in the impugned orders that in order to invoke the penal provisions, concrete evidences of suppression either in purchases or sales is a condition precedent and in the absence of such eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - as against the closing stock arrived at by the Inspecting Officers at Rs. 3,85,990/- only. It is evident that the entire suppression was arrived at basing on the figures shown in the books of accounts and thereby produced by the appellants themselves. Thus, the learned Authorised Representative would argue that in order to levy penalty u/s. 16(2), it is seen that the escaped turnover ought to have been established beyond any pale of doubt. But in the instant cases, no such concrete evidences are available. 14. As per the ratio of the decision of the Supreme Court in the case of State of Madras, V.S.G.Jayaraj Nadar and Sons reported in 28 STC 700 penalty can be levied u/s.12(3) of the TNGST Act on the ground that the dealer had submitted an incomplete or incorrect return only, if the assessment has been made to the best of his judgment by the Assessing Authority, where certain items which are not included in the turnover and discovered from the dealers own account books and the Assessing Authority includes these items in the dealers turnover, the assessment cannot be regarded as based on the best judgment and penalty can be levied in respect of such items. Whereas the account bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover which was fixed by best judgment." 16. The High Court of Madras in the case of K.N.Viswanathan Chettiar and Sons in T.C.1191/79, dt.11.12.1979 has held that "the discrepancy in stock though suggestive of sales or purchase omissions warranting rejection of accounts and for estimation, cannot be held to establish wilful non-disclosure of turnover and hence penalty is not called for." 17. The decision of the High Court in W.P.Nos.2183 to 2192/2000, 8367 to 8371/2000, 18787/2000 and 6104 of 2001 dated 1.10.2001 in the case of Appollo Saline Pharmaceuticals (P) Limited, Tirunelvelli is applicable to the case on hand in deciding the issue of levy of penalty u/s.12(3)(b) of the TNGST Act. The decision of the Hon'ble High Court is extracted hereunder: "Though other sub-sections of Section 12 were amended by the State Legislature subsequent to the date of the judgment in the case of Jayaraj Nadar and Sons (28 STC 700), Sections 12(1) and 12(2) have remained in the same forms. The legislative intention therefore, except during the period 3.12.79 to 27.5.93 and on and after 1.4.96 must be taken to be to, permit the levy of penalty only in case where the assessment is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, which is evident from the fact that the dealer did not even maintain the day book till the time of inspection 04.03.1994, ie., the fag end of the financial year. Therefore, the revision of assessment made for the year 1993-94 and best judgment assessment made for the year 1994-95, is quite in order and inasmuch as the revision/assessment made is quite justified, the consequent levy of penalty under Section 16(2)/12(3)(b) is warranted. 8. Learned Additional Government Pleader (Taxes), further submitted that the Tribunal has failed to note that the assessment made should be regarded as an assessment made under Section 12(2) of the Act, since there is difference between the sales reported and sales suppression arrived at, the time of inspection conducted on 04.03.1994 and therefore, submitted that penal provision under Section 12(3)(b) is warranted and accordingly, the penalty levied is correct and as per the decision reported in 125 STC 107. 9. He further submitted that the Tribunal has erred in deleting the penalty, in view of the fact that the levy of penalty, under Section 12(3)(b), is not called for, as per the amended provisions of Section 12(3)(b) of the TNGST Act and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). If the return submitted by him appears to be incomplete or incorrect. Sub-Section (3) empowers the assessing authority to levy the penalty only when it makes an assessment under sub-Section (2). In other words, when the assessing authority has made the assessment to the best of its judgment, it can levy a penalty. It is well known that the best judgment assessment has to be on an estimate which the assessing authority has to make not capriciously but on settled and recognised principles of justice. An element of guess-work is bound to be present in best judgment assessment but it must have a reasonable nexus to the available material and the circumstances of each case: [see State of Kerala Vs. C.Velukutty {(1966) 17 STC 465 (sc)}. Where account books are accepted along with other records, there can be no ground for making a best judgment assessment. 6. The law so declared that the best judgment assessment is based on an estimate and is not one based solely on the account books was reiterated by the Supreme Court in the case of Commissioner of Sales Tax, Madhya Pradesh Vs. H.M.Esufali H.M.ABDULALI {(1973) 32 stc 77}. 7. Though other sub-Sections of Section 12 were amended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances, applying the said decision reported in [2002] 125 STC 505 (Mad) (Appollo Saline Pharmaceuticals (P) Limited v. Commercial Tax Officer (FAC)) and the Explanation to section12(3)(b) of the Tamil Nadu General Sales Tax Act, the order of the Sales Tax Appellate Tribunal in levying penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 is set aside and the tax case (revision) is allowed. No costs. 13. In Tax Case Revision No.186 of 2009, dated 28/7/2016, between Tvl. Shyam Air Fridge, Vellore and The State of Tamil Nadu, rep. By The Deputy Commissioner (CT), Vellore, on the facts and circumstances of the case, at para No.18, a Hon'ble Dsivision Bench of this Court held as follows:- Levy of penalty would not be justifiable, if at the time of assessment, turnover has been recorded as per the books of accounts, verified by the department and in such circumstances, suppression cannot be attributed. Transaction giving rise to taxable turnover, has been categorically declared by the assessee as composite works contract and at the concessional rate of 4%, tax has been paid. In such circumstances, it cannot be contended that it is a deliberate and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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