1972 (9) TMI 134 - HC - VAT and Sales Tax

Invalid Penalty Imposed Without Final Assessment Order

The court held that the penalty imposed before the final assessment order was invalid as the assessing authority could not determine the accuracy of ... - Issues:1. Imposition of penalty before final assessment order.2. Justification for the imposition of penalty.Analysis:Issue 1: The case involved the imposition of a penalty by the Sales Tax Officer on 28th March, 1960, while the assessment order for the relevant year, 1959-60, was passed on 27th January, 1961. The question raised was whether the Sales Tax Officer had the authority to impose a penalty before finalizing the assessment. The counsel for the assessee argued that penalty could not be imposed before the final assessment order, even if the quarterly returns contained inaccurate information. The standing counsel contended that penalty could be imposed at any stage if inaccurate particulars were furnished. The court referred to relevant cases but found them not directly applicable. The court emphasized that the assessing authority could not determine the correctness of returns until the final assessment order was passed. The court cited the distinction between provisional and regular assessments to support its conclusion that penalty imposition must follow assessment.Issue 2: The second question raised was whether there was sufficient material to justify the imposition of a penalty of Rs. 4,200. The court held that since the Sales Tax Officer could not assess the accuracy of quarterly returns before the final assessment order, the statement made by the assessee admitting additional tax liability could not be considered as material for imposing the penalty. The court clarified that an admission does not constitute evidence until it is considered for proving a fact. Therefore, the statement could not be deemed as material for imposing the penalty. Consequently, the court answered this question in the negative, indicating that there was no sufficient material to justify the penalty amount.In conclusion, the court ruled that the penalty imposed on 28th March, 1960, before the final assessment order, was not valid. Additionally, the statement made by the assessee could not be considered as material for imposing the penalty. The court's decision was based on the interpretation of the relevant rules and the timing of penalty imposition in relation to the assessment process. The court answered both questions in the negative, highlighting the procedural irregularity in imposing the penalty and the lack of sufficient material to justify it.