1977 (12) TMI 134 - HC - VAT and Sales Tax

Court cancels penalty for suppressed turnover under Tamil Nadu Sales Tax Act, emphasizes mens rea requirement.

The High Court upheld the Tribunal's decision to set aside the penalty imposed on suppressed turnover in a tax revision case under the Tamil Nadu General ... - Issues:Tax revision case under section 38 of the Tamil Nadu General Sales Tax Act, 1959 - Penalty for suppressed turnover of Rs. 68,400 for the year 1963-64.Analysis:The tax revision case involved a dispute regarding the penalty imposed on suppressed turnover by the department for the year 1963-64. The Joint Commercial Tax Officer II, Virudhunagar, initially determined the total taxable turnover at Rs. 1,99,309.79 for the year. Subsequently, during a raid, certain entries in account books related to the transport of goods were found, indicating a suppressed turnover by the assessee. The taxing officer estimated the suppression of sales to be Rs. 1,40,680 and levied additional tax and penalty under section 16(2) of the Act.The assessee appealed to the Appellate Assistant Commissioner against the addition to the turnover and the penalty levied. The Appellate Assistant Commissioner set aside the first addition to the turnover, tax, and penalty, but fixed the second additional turnover at Rs. 68,400, resulting in a total taxable turnover of Rs. 1,27,029.79. The appeal was partially allowed by the Appellate Assistant Commissioner.In the further appeal to the Tribunal, the assessee disputed the turnover and the penalty. The Tribunal, relying on legal precedents, observed that the penalty under section 16(2) requires a finding of wilful non-disclosure of assessable turnover by the assessee. Since there was no such finding in the assessment order, the Tribunal canceled the penalty. The Tribunal's decision was based on the requirement of establishing mens rea before penalizing for suppressed turnover.The High Court, following its previous decisions and legal principles, upheld the Tribunal's decision to set aside the penalty. It was emphasized that the mere use of the term 'suppression' is not sufficient to prove wilful non-disclosure, and there must be evidence of deliberate intention to suppress assessable turnover. Therefore, the department failed to establish the necessary mens rea on the part of the assessee, justifying the Tribunal's decision to cancel the penalty.In conclusion, the High Court dismissed the tax revision case without costs, affirming the Tribunal's decision to set aside the penalty imposed on the suppressed turnover.