TaxTMI 
TaxTMI 
2024 (5) TMI 721
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....etitioner's place of business on 17.07.2009 followed by another inspection on 11.11.2010. It is submitted that during the course of the 1st inspection, the petitioner was intimated by the inspecting authorities that the petitioner ought to discharge its liabilities by adding gross profit and freight charges to the purchase value. Accordingly, the petitioner filed its returns by adding gross profit and freight charges to the purchase value and discharged its liability on the works contract executed during the relevant assessment years. The following portions of the sworn statement dated 17.07.2009 made by the General Manager of the petitioner Company is relevant in this regard: "Further you have informed that the payment of VAT as per Section 3(2) is not applicable to us as we are dealers in works contractor. So you have advised us to pay the VAT as per Section 5 of the TNVAT Act, 2006. We admitted the above points and accepted to pay the VAT against Deemed sale value by adding of G.P. on the purchase value. ..... However, during June - 2009 we have move the entire goods to our work site for use in the contract and paid on liabilities after adding G.P.....
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.... Invoice raised for the purpose of payment of output tax. ..... 6. We submit that there was no discrepancies were noticed as per the VAT Audits conducted twice at our place of business. But you have passed assessment order treating the difference between the sales reported by us and the purchase turnover reported by our customer as sales suppression and levied tax thereon. We have disclosed the entire turnover in our books of accounts, filed monthly returns and paid tax. We had produced our records at the time of filing our objection. The levy of penalty u/s. 27(3) of the Act only when there is escapement from assessment due to wilful nondisclosure of taxable turnover by the assessee. In our case the difference in the sales turnover reported by us and the purchase turnover reported by our customer is only due to the change of method of payment of taxes, that too as per the approval of Enforcement Officers. Further in our case no will full nondisclosure was noticed. And secondly, for alleged difference in turnover as stated above, your good self did not consider the labour charges which was added to the cost of the goods sold at the time of raising sale bi....
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....e dated 20.05.2014 and 05.05.2015 clearly explained that the present method of payment of tax under section 5 of the TNVAT Act, 2006 had been adopted on the basis of the directions and the approval of Enforcement Wing Officers. Therefore, your good self could not alleged the short payment of tax by us as stated in the assessment order. Penalty u/s. 27(3): Rs. 41,53,142/- 5... The levy of penalty u/s.27(3) of the Act only when there is escapement from assessment due to wilful nondisclosure of taxable turnover by the assessee. In our case the difference in the sales turnover reported by us and the purchase turnover reported by our customer is only due to the change of method of payment of taxes, that too as per the approval of Enforcement Officers. Further in our case no will full non-disclosure was noticed. And secondly, for alleged difference in turnover as stated above, your good self did not consider the labour charges which was added to the cost of the goods sold at the time of raising sale bills. If your good self consider these aspects the question of sales suppression would not have arisen" (emphasis supplied) 4.2. The above objections were reiterated ....
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.... inspection on 17.07.2009 and accordingly complete the assessments under TNVAT Act for the assessment years 2009-10 to 2012-13. The above writ petition was disposed of with the following observation : "5. The learned single Judge in the order extracted above, has, in my considered view, directed an assessment to be completed, de novo, including specifically the issue of whether the plea raised by the petitioner in regard to method of accounting is bonafide or otherwise. Thus, there is some merit in the argument that the issue as to whether the method of accounting followed was bonafide or otherwise, should be considered specifically as a preliminary issue particularly, in the light of statement dated 17.07.2009. 6.Thus, the impugned orders are set aside and these writ petitions disposed, directing the petitioner to appear before the Assessing Authority on Friday the 20 th December, 2019 at 10.30 a.m. without expecting any further notice in that regard. The petitioner shall be heard on all issues arising from the assessment including specifically the question of whether the method of accounting canvassed by it is bonafide or otherwise. The order of assessment passe....
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....iability would have to be determined on the basis of the provisions. It would ill lie in the mouth of the assessee to suggest that they had acted on the advise of the officer while acting in contravention of the provisions of the Act. The learned Additional Advocate General for the respondent would further submit that the very fact that the petitioner had chosen to simply follow the directions / suggestions of the Enforcement Wing Officers itself is indicative of lack of bonafides on the part of the petitioner and thus, the levy of penalty is justified. 11. Heard both sides. Perused the materials on record. 12. Before I proceed further, it may be relevant to refer to Section 27(3) of the Act: "27(3) In making an assessment under clause (a) of subsection (1), the assessing authority may, if it is satisfied that the escape from the assessment is due to wilful non-disclosure of assessable turnover by the dealer, direct the dealer, to pay, in addition to the tax assessed under clause (a) of sub-section (1), by way of penalty a sum which shall be - (a) fifty per cent of the tax due on the turnover that was wilfully not disclosed if the tax due on such turnover is....
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....:33790821247/2011-12: "In view of the above circumstances, I confirmed the order passed on 21.05.2015. Suppression Turnover determined - Rs. 27,64,27,888.00 Tax due - Rs. 1,21,45,789.00 15% Tax paid on 26.08.2016 - Rs. 18,21,868.00 Rs. 1,03,23,921.00 A Notice in Form "O" issued. Penalty u/s. 27(3) Penalty levied for the tax due Rs. 1,21,45,789/- at 150% Penalty due - Rs. 1,82,18,684.00 Penalty paid - Rs. 0.00 Balance - Rs. 1,82,18,684.00 TIN:33790821247/2012-13: "In view of the above circumstances, I confirmed the order passed on 21.05.2015. Suppression Turnover determined - Rs. 1,16,16,987.00 Tax due - Rs. 3,97,066.00 15% Tax paid on 26.08.2016 - Rs. 59,560.00 Rs. 3,37,506.00 A Notice in Form "O" issued. Penalty u/s27(3) Penalty levied for the tax due Rs. 3,97,066/- at 150% Penalty due - Rs. 5,95,599.00 Penalty paid - Rs. 0.00 Balance - Rs. 5,95,599.00 13.2. The failure to examine / render a finding as to the existence of the jurisdictional fact v....
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....sing authority, while exercising suo motu powers of revision, to assume that there was such a wilful suppression of sales turnover on the part of the assessee. The Deputy Commissioner, no doubt, had the right to look into the records and scrutinise the order of the statutory functionary in the lower hierarchy, so as to correct it, if such a correction was necessary. But it is very doubtful whether he could assume that in every case where the best judgment method is adopted as a result of which there is an increase in the assessable turnover as discovered by the assessing authority that there has been a wilful suppression of sales turnover. Levy of penalty springs from the act which amounts to misconduct and being penal in nature ought not to be the product of any assumption. The Deputy Commissioner in the exercise of his revisional power thought that he could fix the penalty at Rs. 2,061, once again on the supposition that there was wilful suppression. There was no such direct or telling finding by the assessing authority. It is not even contended to be so before us. It was in those circumstances that the Tribunal, in the appeal filed by the aggrieved assessee for cancellation of t....
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.... effect may not prove fatal. After referring to the judgment of this Court in the case of State of Tamil Nadu v. Sri Swamy and Co. reported in (1977) 39 STC 85 and in the case of State of Tamil Nadu v. R.R.Ramachari and Sons reported in (1977) 40 STC 542 wherein it was found that the use of expression "suppression" by itself would show that the assessing officer had found that there was wilful non-disclosure, this Court proceeded to consider the scope of the expression "not wilfully disclosed" employed in Section 12(3) of the Act and it was held as under: "The whole question for consideration is what exactly is the ambit of the expression "not wilfully disclosed" occurring in section 12(3). This expression has been the subject-matter of consideration by this Court. All that we are interested in pointing out at this stage is that for the purpose of sustaining the levy of penalty under section 12(3), it is not necessary that the officer imposing the penalty must mechanically reproduce the expression "not wilfully disclosed" as if it were a formula or manthram to be repeated in order to attract the levy of penalty or sustain the levy of penalty. If the discussion in the order....
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....purchase turnover Tvl. Gamesa Wind Turbines Private Limited is not valid. Mere rejection of reasons / explanation for the difference of turnover reported by the petitioner and its purchaser may not necessarily result in concluding that there was wilful nondisclosure of assessable turnover. c. Method of computation for discharging liability of works contract -within know ledge of the department - no suppression : 13.8. Yet another reason why penalty may not be warranted in the present case is in view of the fact that the method of computation of liability was on the basis of instruction issued by Enforcement Wing Officers. In any view, the method of accounting was disclosed to Enforcement Wing Authorities. The above aspect being within the knowledge of the department, the question of suppression would not arise. In this regard, it may be useful to refer to the following judgments: i) C CE v. C.M.S. Computers (P) Ltd. , reported in (2005) 10 SCC 46 : "1. This appeal is against the judgment of the Tribunal dated 24-11-1998. The respondents manufactured mini computer processing system of the following models: ...... 2. Prior to March 1987 compu....