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TMI Blog2024 (5) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The Madras High Court in the various judgments had held that finding of wilful non-disclosure of assessable turnover is a condition precedent for invoking penalty under Section 27(3) of the Act and failure to render a finding of wilful non-disclosure of assessable turnover would prove fatal to the levy of penalty. Reliance placed in State of Tamil Nadu v. S. M. Baba Sahib [ 1977 (10) TMI 93 - MADRAS HIGH COURT] where it was held that A wilful non-disclosure of assessable turnover is a necessary ingredient to make out that part of the section, namely, a deliberate intention to suppress an assessable turnover which should, in fact, have existed. It is not possible to say, merely from the fact that there has been a reassessment of escaped turnover on the basis or best judgment, that there has been a wilful nondisclosure of assessable turnover. There must be something to indicate that the turnover did in fact exist and that the assessee had wilfully not disclosed that assessable turnover. The finding of wilful non-disclosure is a sine-qua-non for attracting penalty under Section 27(3) of the Act. Though there may be reasons for making a best judgment assessment, penalty does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner was itself suggested / instructed by the revenue - method of accounting adopted by the petitioner which is the reason for the difference between the sales turnover reported by the petitioner vis-a-vis purchase turnover. The impugned orders insofar as the levy of penalty under Section 27(3) of the TNVAT Act are thus set aside, the remaining portions of the impugned orders of assessment dated 21.12.2020 for the assessment years 2009-2010 to 2012-13 remains undisturbed. The writ petition is disposed off. X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 27.04.2017 that the difference between the sales turnover reported by the petitioner and the purchase turnover reported by its customer viz., Tvl.Gamesa Wind Turbines Private Ltd., was only in view of the method of computation adopted by the petitioner on the basis of advice / suggestion of the Enforcement Wing Officers. The relevant portion of the objection for the assessment year 2009 - 10 is extracted hereunder : "2. ..... It is also relevant to state that even on verification of records the Enforcement Officials who conducted inspection on 17.07.2009 and 11.11.2010 have not found out any sales suppression from our records. ..... 4. ..... At the time of inspection the said Officers enquired about the carry forward input tax without any sales during the same months. After verifying our records they informed us to pay output tax under section 5 of The TNVAT Act, 2006. We admitted and accepted to pay the tax against Deemed sale value by adding transportation charges and gross profit at 10% to the purchase value of the goods. Thereafter, we have followed the said method in paying the output tax in the month in which purchases are effected in order to avoid carry forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted to pay the tax against Deemed sale value by adding transportation charges and gross profit at 10% to the purchase value of the goods. Thereafter, we have followed the said method in paying the output tax in the month in which purchases are effected in order to avoid carry forward of input tax credit, in consequence of this method we do not wait all such time that the goods are used in the works contract or sales Invoice raised for the purpose of payment of output tax. 4. We submit that thereafter another inspection was conducted by the Commercial Tax Officer (CT) Group IV Central Enforcement II, Chennai at our place of business on 11.11.2010. On verification of our records and returns, the Enforcement Wing Officers pointed the liability to pay purchase tax on the purchase of materials like sand, blue metal, bricks, consumables purchased from unregistered dealers in the State and used in the execution of works contract and they collected purchase tax from us. The said Enforcement Officers did not find fault with the method of payment of out put tax and adjustment of input tax credit. Hence we continued to pay tax under section 5 of the TNVAT Act, 2006 as stated in 4t h p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement Wing officials on 11.11.2010. A sworn statement was recorded from Mr. N. Subramanian, General Manager Engn & Admin. and a copy of the same is enclosed as Annexure-II. Even at the time of second inspection held on 11.11.2010, the methodology suggested by the inspecting officers during the earlier inspection was not objected to by the authorities. In fact, they asked us to remit whatever tax is payable by us and accordingly we remitted the same. From the above mentioned facts, it is clear that the methodology for payment of tax on deemed sale value basis under Section 5 of the TNVAT Act was suggested and directed only by the inspecting officers. The same is also not objected to by the inspecting officers during their second inspection held on 11.11.2010. Therefore, it is a clear case of bona fide and there is no need or recessity to object the same." (emphasis supplied) 5. In the meanwhile, the petitioner filed a writ petition in W.P.No.34650 of 2019 for a writ of mandamus, directing the respondent to accept the method of computing tax liability on deemed sales under Section 5 of the TNVAT Act, in terms of the instructions/directions/suggestions stated to have been issued/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2010-11), Rs. 27,64,27,888/- (for the assessment year 2011-12), Rs. 1,16,16,987/- (for the assessment year 2012-13) as allegedly representing suppression. 8. It is submitted that the limited challenge in the present writ petition is whether it is permissible for the respondent to invoke Section 27(3) of the Act, keeping in view the stated factual background viz., that the petitioner discharged the liability for executing works contract on the basis of the method of accounting suggested / advised by the inspecting officers viz., Enforcement Wing Officers. 9. It is submitted by the learned Senior Counsel for the petitioner that there is no question of wilful non-disclosure of assessable turnover since the petitioner only adopted /followed the method suggested / advised by the Enforcement Wing Officers while discharging the liability in respect of the works contract which would show that the petitioner had acted bonafide. In the absence of the jurisdictional fact viz., wilful nondisclosure being present the levy of penalty under Section 27(3) of the Act cannot be justified. 10. To the contrary, it was submitted by the learned Additional Advocate General appearing for the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years 2009-10 to 2012-13: TIN:33790821247/2009-10: "In view of the above circumstances, I confirmed the order passed on 21.05.2015. Suppression Turnover determined - Rs. 1,78,90,217.00 Tax due - Rs. 7,15,609.00 15% Tax paid on 26.08.2016 - Rs. 1,07,341.00 Rs. 6,08,268.00 A Notice in Form "O" issued. Penalty u/s. 27(3) Penalty levied for the tax due Rs. 715609/- at 150% Penalty due - Rs. 10,73,413.00 Penalty paid - Rs. 0.00 Balance - Rs. 10,73,413.00 TIN:33790821247/2010-11: "In view of the above circumstances, I confirmed the order passed on 21.05.2015. Suppression Turnover determined - Rs. 3,19,40,468.00 Tax due - Rs. 27,68,761.00 15% Tax paid on 26.08.2016 - Rs. 4,15,314.00 Rs. 23,53,447.00 A Notice in Form "O" issued. Penalty u/s 27(3) Penalty levied for the tax due Rs. 27,68,761/- at 150% Penalty due - Rs. 41,53,142.00 Penalty paid - Rs. 0.00 Balance - Rs. 41,53,142.00 TIN:33790821247/2011-12: "In view of the above circumstances, I confirmed the order passed on 21.05.2015. Suppression Turnover determined - Rs. 27,64,27,888.00 Tax due - Rs. 1,21,45,789.00 15% Tax paid on 26.08.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the books of account of the assessee and taking into consideration the surrounding circumstances. Unless there is a finding by the assessing authority that there has been a wilful suppression, which springs from the contumacious conduct on the part of the assessee, which is discernible from the course of his conduct as a businessman, it would not be safe to assume that, by reason of the best judgment assessment and by reason of the increase in the assessable turnover as discovered by the assessing officer, there is an automatic conclusion about the suppression and that too wilful suppression of assessable turnover by the assessee. Each case has to be decided on its own merits. In the instant case, it is not stated that there was such a finding which would provoke a reasonable assessing authority, while exercising suo motu powers of revision, to assume that there was such a wilful suppression of sales turnover on the part of the assessee. The Deputy Commissioner, no doubt, had the right to look into the records and scrutinise the order of the statutory functionary in the lower hierarchy, so as to correct it, if such a correction was necessary. But it is very doubtful whether he c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act: 13.5. As stated supra, while the cases referred above would require finding of wilful non-disclosure as a condition precedent for invoking penalty under Section 27(3) of the Act. However, this Court in the case of P.M.Perianna Pillai vs. The Commissioner, Board of Revenue (C.T.) reported in (1980) 46 STC 94 held that finding of wilful non-disclosure is not a formula and mere repetition of the above expressions would not attract levy of penalty. In other words, failure to render a finding on wilful non-disclosure would not prove fatal under all circumstances. On the other hand, it was held that if on perusal of the orders of assessment one is able to discern that there was in fact wilful non-disclosure of assessable turnover, absence of a finding to the said effect may not prove fatal. After referring to the judgment of this Court in the case of State of Tamil Nadu v. Sri Swamy and Co. reported in (1977) 39 STC 85 and in the case of State of Tamil Nadu v. R.R.Ramachari and Sons reported in (1977) 40 STC 542 wherein it was found that the use of expression "suppression" by itself would show that the assessing officer had found that there was wilful non-disclosure, this Court p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the dealer at the other end. i.e., Tvl. Gamesa Wind Turbines Private Limited. The following portion of the order is extracted hereunder: "The dealer has not furnished any valid reasons for the difference in the sales turnover reported to that of the purchase turnover claimed by the dealer at the other end. i.e., Tvl. Gamesa Wind Turbines Private Limited (TIN:33080905979) as it is noticed that they have reported lesser sales whereas, the dealer at the other end has reported more purchases and thereby availed excess ITC." 13.7. From a reading of the above portion of the impugned orders, it is evident that the assessment orders only states that the reasons put forth by the petitioner for difference between the sales turnover reported by the petitioner vis-a-vis purchase turnover Tvl. Gamesa Wind Turbines Private Limited is not valid. Mere rejection of reasons / explanation for the difference of turnover reported by the petitioner and its purchaser may not necessarily result in concluding that there was wilful nondisclosure of assessable turnover. c. Method of computation for discharging liability of works contract -within know ledge of the department - no suppression : 13.8. Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful suppression. Where the facts are known to both the parties, there cannot be a "suppression of fact" under Section 11-A of the Act." (emphasis supplied) iii. Pushpam Pharmaceuticals Co. v. Collector of Central Excise, reported in 1995 Supp (3) SCC 462: "The expression "suppression of fact" is to be construed strictly because it has been used in company of such strong words as fraud, collusion or willful default. It does not mean omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties, the omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied) 14. In the light of the above discussion, I am of the view that in the circumstances levy of penalty under Section 27(3) of the Act may not be warranted for the following reasons: a. There is no finding of wilful non-disclosure of assessable turnover which is a condition precedent for attracting Section 27(3) of the Act. b. Even on reading of the assessment orders as a whole, it is not possible to di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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