Mandatory penalty under audit assessment provisions cannot be waived once Section 42 assessment is completed.

Penalty under Section 42(5) of the Odisha Value Added Tax Act, 2004 is mandatory where an audit assessment is completed under Section 42(3) or Section 42(4), and the assessing authority has no discretion to waive or reduce it. The provision operates as a statutory consequence of such assessment, requiring a penalty equal to twice the tax assessed. The High Court stated that the Tribunal erred in deleting the penalty on grounds of absence of deliberateness and disclosure in the books, because those considerations are not relevant within the audit assessment regime.

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Issues: Whether penalty under Section 42(5) of the Odisha Value Added Tax Act, 2004 is mandatory after an audit assessment under Section 42(4), and whether the Tribunal was right in deleting the penalty while sustaining the tax demand on the uncollected VAT amount.

Analysis: The assessment arose from an audit visit report and was completed under the audit assessment scheme of Section 42 of the Odisha Value Added Tax Act, 2004. The statutory language of Section 42(5) provides that, where an assessment is completed under Section 42(3) or Section 42(4), an amount equal to twice the tax assessed shall be imposed by way of penalty. The provision leaves no discretion with the assessing authority to waive or reduce the penalty once the audit assessment is completed. The earlier decision upholding the constitutional validity of Section 42(5) was relied upon to reaffirm that the penalty is a statutory consequence of such assessment. The decision deleting penalty on the basis of absence of deliberateness and reference to disclosure in books of account was held to be inapplicable in the context of this audit assessment regime.

Conclusion: The penalty under Section 42(5) is mandatory in an audit assessment under Section 42(4), and the deletion of penalty by the Tribunal was erroneous. The issue is answered in favour of Revenue and against the assessee.

Ratio Decidendi: Where an assessment is completed under the audit assessment provisions, penalty equal to twice the tax assessed follows automatically and cannot be treated as discretionary.

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