2018 (12) TMI 1012 - HC - VAT and Sales Tax

Court Upholds Penalty Proceedings; Dismisses Writ Appeal

The court upheld the judgment of the learned Single Judge, refusing to interfere with the penalty proceedings under Article 226. The court found that the ... Penalty - Whether the refusal to exercise discretion by the learned Single Judge as against penalty proceedings was proper or not, especially considering the fact that the penalty proceeding taken was under Section 67 of the Kerala Value Added Tax Act, 2003? Held that:- When a penalty proceeding is initiated there is no question of a permission to file revised return, beyond the period of limitation - In the present case, the notice issued at Ext.P2 was dated 28.03.2018. The assessee has a contention that Ext.P3 communication seeking revised reruns was issued on 27.03.2018, a day before the proceedings had commenced. However, it is to be emphasised that the audited statement was filed long back on 16.05.2017, when the assessee definitely had the knowledge of the shortfall in the returns. There was no cause for the assessee to have, not sought for a revised return immediately thereafter. The Intelligence Officer had in attempting to find out the correct figures as per the audited report computed the tax evaded so as to determine the penalty; which is a permissible exercise. We hence leave the assessee to a statutory appeal which if filed within one month from today, shall be deemed to be properly filed in time and considered on merits. Appeal dismissed. Issues Involved:1. Whether the refusal to exercise discretion by the learned Single Judge against penalty proceedings was proper.2. Whether the Intelligence Officer had jurisdiction to initiate penalty proceedings under Section 67 of the Kerala Value Added Tax Act, 2003.3. Whether the discrepancies in the returns filed by the assessee justified the imposition of penalty.4. Whether the assessee should have been permitted to file a revised return beyond the prescribed time limit.5. Whether the Intelligence Officer's actions amounted to an estimation of tax, which is not permissible.Detailed Analysis:1. Refusal to Exercise Discretion by the Learned Single Judge:The primary question was whether the refusal to exercise discretion by the learned Single Judge against penalty proceedings was proper. The court cited the case of State of H.P v. Gujarat Ambuja Cement Ltd. [2005) 6 SCC 499], which outlines specific grounds for interference, such as violation of principles of natural justice and clear abuse of process of law. However, the court emphasized that such grounds should be used sparingly and only when palpable injustice is evident.2. Jurisdiction of the Intelligence Officer:The appellant argued that the Intelligence Officer lacked jurisdiction to initiate penalty proceedings under Section 67, contending that the Assessing Officer should have handled the matter under Section 25(3). The court, however, referred to the judgment in Hotel Ambassador 1980 (45 STC 425(Ker), which held that the power of the Assessing Officer under Section 25 is independent of the power of the Intelligence Officer under Section 67. The court affirmed that Section 67 is not regulated by Section 25(3) and upheld the jurisdiction of the Intelligence Officer.3. Discrepancies in Returns and Imposition of Penalty:The court noted that the assessee filed its audited statement on 16.05.2017, revealing discrepancies in the returns for the year 2014-15. The assessee did not file a revised return as permitted under Section 42, which led to the Intelligence Officer initiating penalty proceedings. The court highlighted the obligation under the VAT regime for the assessee to file a correct return, as emphasized in State of Kerala v. Joy Alukkas [2018(3) KLT 360]. The court found that the failure to file a revised return indicated an attempt to avoid bringing discrepancies to the department's notice, justifying the penalty.4. Permission to File Revised Return Beyond Prescribed Time:The court considered the appellant's reliance on C.R. Varghese and other cases where permission to file revised returns was granted beyond the prescribed time. However, the court distinguished the present case, noting that the audited statement was filed long before the penalty proceedings were initiated, and the assessee had ample opportunity to file a revised return. The court emphasized that once penalty proceedings are initiated, permission to file a revised return cannot be granted.5. Estimation of Tax by the Intelligence Officer:The appellant argued that the Intelligence Officer made an estimation of tax, which is not permissible. The court examined the penalty order and found that the GP at 60% was disclosed in the returns, and no estimation was made by the Intelligence Officer. The court left this contention open for the assessee to urge before the Appellate Authority, stating that if any estimation was made, the principles in U.K Monu Timbers and Joemon Rajan would apply.Conclusion:The court upheld the judgment of the learned Single Judge, refusing to interfere with the penalty proceedings under Article 226. The court found that the grounds for interference were not available and left all other contentions open for the statutory appeal. The writ appeal was dismissed with no order as to costs.