2018 (12) TMI 1280 - HC - VAT and Sales Tax

Court rules willful non-disclosure required for penalty under TNVAT Act Section 27(3).

M/s. Sri Vignesh Jewellers, Coimbatore Versus The State of Tamil Nadu

The High Court held that for penalty imposition under Section 27(3) of the TNVAT Act, willful non-disclosure of assessable turnover must be proven, not ... Restoration of penalty u/s 27(3) of the TNVAT Act - it was alleged that sales turnover was disproportionate to the purchases - TNVAT Act - Held that:- The Appellate Deputy Commissioner rightly considered the petitioner's plea and deleted penalty. The reasons assigned by the Tribunal for restoring the penalty are not convincing and are not in accordance with the law - It is not disputed by the Revenue that the alleged difference in turnover was found out only from the books of accounts i.e. the returns filed by the assessee under the Income Tax Act, 1961 and the monthly returns filed under the TNVAT Act. In such circumstances, there can be no allegation of willful non disclosure of taxable turnover. The penalty, which has been restored by the Tribunal, is set aside - tax case revision allowed. Issues involved:1. Alleged suppression of turnover in sales and purchases by a dealer in gold and silver articles.2. Discrepancy in turnover reported to the Income Tax Department and the Sales Tax Department.3. Imposition of penalty under Section 27(3) of the Tamil Nadu Value Added Tax Act, 2006.Analysis:1. The petitioner, a dealer in gold and silver articles, claimed exemption for sales of exempted goods in their monthly returns but faced allegations of not maintaining a separate stock register for exempted sales, leading to a threat of exemption rejection. The Inspecting Team also accused the petitioner of reporting higher turnover to the Income Tax Department compared to the Sales Tax Department, suggesting sales suppression.2. Upon inspection, officials found slips indicating purchase and sales suppression for the assessment year 2013-14, prompting the Assessing Officer to issue notices proposing tax levy for alleged suppression. The petitioner contended that any differences in turnover were promptly addressed upon notification and were based on their own accounts, denying willful non-disclosure of assessable turnover.3. The Assessing Officer rejected the petitioner's objections, leading to assessment orders confirming the proposed tax levy and penalty under Section 27(3) of the TNVAT Act. However, the Appellate Deputy Commissioner, in a common order, sustained sales and purchase suppression but deleted the equal addition and penalty imposed.4. Subsequently, the State appealed to the Tribunal, which partly allowed the appeals, restoring the penalty by rejecting exemption claims due to disproportionate sales turnover. The Tribunal's decision was challenged through revisions, questioning the legal correctness of restoring the penalty under Section 27(3) of the TNVAT Act.5. The High Court emphasized that for penalty imposition under Section 27(3) of the TNVAT Act, willful non-disclosure of assessable turnover must be proven, as mere non-disclosure is insufficient. Citing various precedents, the Court highlighted the necessity of establishing intentional evasion of tax to justify penalty imposition.6. The Court found that the Tribunal's reasons for restoring the penalty were not compelling and contradicted established legal principles. Since the alleged turnover differences were from the petitioner's own accounts and taxes were promptly paid upon identification of discrepancies, there was no evidence of willful non-disclosure. Consequently, the Court allowed the revisions, set aside the restored penalty, and upheld the Appellate Deputy Commissioner's decision. The substantial questions of law were answered in favor of the petitioner.