2018 (7) TMI 1704 - HC - VAT and Sales Tax

Court Upholds Penalty for Tax Evasion on Gold Voucher & Asset Sale

State Of Kerala Versus M/s. Alukkas Jewellery,

State Of Kerala Versus M/s. Alukkas Jewellery, - TMI Issues:1. Addition made on the strength of a cancelled issue voucher of gold.2. Penalty levied on the sale of fixed assets.Analysis:Issue 1: Addition made on the strength of a cancelled issue voucher of goldThe case involved discrepancies found during an inspection by the Intelligence Officer at the premises of the assessee, a dealer in jewellery. The first appellate authority and the Tribunal confirmed these discrepancies. The questions of law revolved around a cancelled issue voucher of gold and the penalty imposed. The cancelled voucher indicated the transfer of 2000 grams of gold to an artisan, which was later cancelled. The Tribunal deleted the addition based on the cancelled voucher, citing lack of summoning the artisan and verification of the stock register by the Intelligence Officer. However, Section 67 of the KVAT Act places the burden of proof on the person alleged to have committed an offence leading to tax evasion. The burden was on the assessee to prove no attempt to evade tax, but they failed to summon the artisan or enable verification of the stock register. Consequently, the Tribunal erred in casting the burden on the Intelligence Officer, leading to the deletion of the penalty, which was set aside by the Court.Issue 2: Penalty levied on the sale of fixed assetsRegarding the penalty imposed on the sale of fixed assets not disclosed in the monthly return, the Court considered the argument that the transaction was recorded in the books of accounts. Citing previous decisions, the Court emphasized that when there is disclosure in the books of accounts, no penalty should be imposed as there is no contumacious conduct. However, under the KVAT Act's self-assessment regime, the obligation on the assessee to file a correct return is more stringent. The Court distinguished cases under different tax regimes where regular assessments were conducted. In this case, the assessee filed an incorrect return, did not disclose the sale of fixed assets, and only rectified the liability after notice of penalty. The Court ruled in favor of the revenue, upholding the penalty on the sale of fixed assets but reducing it to the actual amount of tax sought to be evaded due to the revised return and payment made by the assessee.In conclusion, the Court answered the questions of law in favor of the revenue and against the assessee, upholding the penalty on the cancelled issue voucher of gold and the sale of fixed assets with modifications on the quantum of penalty.