1976 (3) TMI 208 - HC - VAT and Sales Tax

Penalty proceedings can run parallel to assessment; failure nature determined during penalty stage

The court upheld the legality of issuing a show cause notice for penalty before finalizing the revised assessment, stating that penalty proceedings can ... - Issues Involved:1. Legality of issuing a show cause notice for penalty before finalizing the revised assessment.2. Requirement of a finding on the nature of failure (wilful, non-wilful, or bona fide mistake) before initiating penalty proceedings.3. Allegation of ante-dating the penalty order to avoid the bar of limitation.Issue-wise Detailed Analysis:1. Legality of Issuing a Show Cause Notice for Penalty Before Finalizing the Revised Assessment:The petitioner contended that the issuance of a show cause notice on 24th March 1971, before finalizing the revised assessment on 31st March 1971, was incompetent and illegal. The court examined the relevant provisions of the Andhra Pradesh General Sales Tax Act, 1957, particularly section 14, which outlines the procedure for assessment and levy of penalties. Sub-section (2) of section 14 allows the assessing authority to direct the dealer to pay a penalty at the time of making a best judgment assessment. Similarly, sub-section (4) permits the assessing authority to levy a penalty in addition to the tax assessed during a revised assessment. The court concluded that the Act does not indicate that penalty proceedings must commence only after the assessment proceedings are concluded. Both proceedings can be simultaneous, and the issuance of a show cause notice for penalty before finalizing the revised assessment is not illegal.2. Requirement of a Finding on the Nature of Failure Before Initiating Penalty Proceedings:The petitioner argued that the assessing authority must first determine whether the failure to disclose turnover was wilful, non-wilful, or due to a bona fide mistake before initiating penalty proceedings. Sub-section (8) of section 14 specifies different penalties based on the nature of the failure. The court noted that sub-section (4-B) provides for a reasonable opportunity to be given to the assessee before levying a penalty, ensuring that the assessee can explain the omission. The court emphasized that the assessing authority's initial notice proposing a penalty is a prima facie opinion, not a final determination. The authority must provide the assessee an opportunity to rebut or explain, after which the authority may confirm, modify, or revoke the penalty. Therefore, the requirement of a finding on the nature of failure is inherently part of the penalty proceedings, and the process followed by the assessing authority was deemed appropriate.3. Allegation of Ante-dating the Penalty Order to Avoid the Bar of Limitation:The petitioner claimed that the penalty order was not actually passed on 31st March 1971 but was ante-dated to avoid the bar of limitation, as the revised assessment order was served on 12th July 1971 and the penalty order on 7th July 1972. The Tribunal had observed that while the circumstances created suspicion, there was no clear evidence to support the claim of ante-dating. The court agreed with the Tribunal, noting the lack of concrete evidence. However, the court also remarked that such delays and errors in serving orders could undermine confidence in the fairness of the assessing authorities and advised the authorities to avoid such situations.Conclusion:The court dismissed the petition, upholding the legality of issuing a show cause notice for penalty before finalizing the revised assessment and confirming that the process followed by the assessing authority was in accordance with the Act. The allegation of ante-dating the penalty order was not substantiated by clear evidence. The petition was dismissed with costs, and the advocate's fee was set at Rs. 100.