2019 (4) TMI 116 - HC - VAT and Sales Tax

Court upholds tribunal's decision reducing penalty under tax acts, emphasizing assessing officer's discretion and unique circumstances.

The court dismissed the tax case revisions, confirming the tribunal's decision to reduce the penalty to 100% for suppressed turnover under the Pondicherry ... Quantum of penalty - suppression of taxable turnover - filing of revised return - Section 26 of the Puducherry Value Added Tax Act - Held that:- In terms of Clause (a) of the Puducherry Value Added Tax Act, the dealer shall not be eligible to file revised return if any action either has been initiated or pending under Section 24 or under Section 30 or under any other Section under the Puducherry Value Added Tax Act. Admittedly, the proceedings were initiated under Section 24(1) of the Act and the pre-assessment notices were issued in June 2006. The assessee, after having suffered the assessment order and agreeing to pay the tax, had filed the revised return. Such revised return is not a return in the eye of law and it is not maintainable. Therefore, the question of either accepting or rejecting such return does not arise, as such return can never be taken on file - thus, the contention raised by the assessee based on the plea that they have filed revised return, deserves to be outrightly rejected and it is accordingly rejected. Section 24(3) states that when making any assessment under sub-section (2), the assessing authority may also direct the dealer to pay in addition to the tax assessed, a penalty not exceeding double the amount of tax due on the turnover that was not disclosed by the dealer in his return or, in the case of failure to submit a return, double the amount of tax assessed, as the case may be. The proviso uses the expression “may also direct”, which appears to give an opinion that there is a discretion vested with the assessing officer. In the instant case, the assessee was a dealer in petroleum products and admittedly there has been a suppression of taxable turnover. However, the fact remains that the assessee has paid the tax as quantified by the assessing officer, though not in one single shot, but in installments as granted by the department. The imposition of 200% penalty would require a clear finding of the condemnatious conduct of the assessee and that the conduct of the assessee was thoroughly lacking bonafide. In the assessment order, there is a proposal for one and a half or two times penalty for suppression. It is true that the assessee did not give any explanation to the pre-assessment notice - taking note of the peculiar facts and circumstances of the case, it can be said that imposition of penalty at 200% was excessive and levy of penalty at 100% would meet the ends of justice. Admittedly, the assessee has paid the entire tax liability in installments as granted by the department along with the tax equal to 2% of such amount for each month or part thereof, after the date specified for its payment in terms of Section 37(4) of the Puducherry Value Added Tax Act - the judgement of the Tribunal in the case of M/S. SURYA SERVICE STATION VERSUS THE APPELLATE ASSISTANT COMMISSIONER (CT) , PUDUCHERRY [2018 (12) TMI 1542 - MADRAS HIGH COURT] applies to the present case, wherein the Court had dismissed the tax case revisions filed by the assessee and allowed the tax case revisions filed by the department and restored the order of the original authority on identical set of facts. The tax case revisions are dismissed. Issues:Levy of penalty on the assessee for suppression of taxable turnover under Pondicherry General Sales Tax Act, 1967 and Pondicherry Value Added Tax Act for assessment years 2007-08, 2008-09, and 2009-10.Analysis:1. The case involved two sets of tax cases, one filed by the revenue and the other by the respondent, a registered dealer. The substantial questions of law raised by the revenue included issues related to the reduction of penalty amount by the Presiding Officer based on the respondent's reasoning of business losses and failure to remit collected tax.2. The matter pertained to the assessment of tax liability and penalty on the assessee for suppressed turnover. The Assessing Officer issued pre-assessment notices, which were confirmed leading to the assessee paying the entire tax in installments. The assessee sought to reopen the assessment by filing revised returns, which were not considered or accepted.3. The first contention was whether the assessee was entitled to file a revised return under Section 26 of the Puducherry Value Added Tax Act. The court held that as the proceedings were initiated before the revised return was filed, it was not maintainable, and thus, the contention was rejected.4. The assessing officer invoked power under Section 24 for detailed assessment due to suspected turnover suppression. The tribunal later reduced the penalty from 200% to 100%, citing the Act's provision and circumstances of the case.5. The tribunal's decision to reduce the penalty was challenged by the revenue, arguing that sympathy should not influence penalty imposition. The court analyzed the discretion vested in the assessing officer under Section 24(3) and upheld the tribunal's decision based on the unique circumstances of the case.6. The court emphasized that the imposition of a 200% penalty required a clear finding of condemnable conduct by the assessee, which was not fully established. Considering the assessee's payment of the entire tax liability in installments, the court found the 100% penalty to be appropriate and upheld the tribunal's judgment.7. In conclusion, the court dismissed the tax case revisions, confirming the tribunal's decision to reduce the penalty to 100% and emphasizing the unique circumstances and payment of tax liability by the assessee.