Baluswami Chettiar vs State of Tamil Nadu

Gokulakrishnan, J.—The assessee in this case is running a metal oiling mill under the name and style of ""Balu Metal Rolling Mills"". He is also

dealing in brass vessels and doing business in Angeripalayam, Tirupur. For the assessment year 1969-70 he was finally assessed on total taxable

turnover of Rs. 13,51,129.40 by the Deputy Commercial Tax Officer (Rural), Tirupur. On 20th July, 1971, the intelligence wing of the sales tax

department inspected the assessee''s business premises at Angeripalayam and recovered certain account books and slips relating to his business.

On a scrutiny of the same with the regular accounts maintained by the assessee, the intelligence wing found that the assessee has suppressed a sales

turnover of Rs. 7,95,709.72. This escaped assessment was added to the total taxable turnover originally fixed and the total was arrived at Rs.

21,46,839.12. On this assessee was assessed u/s 16(1) of the Tamil Nadu General Sales Tax Act (hereinafter referred to as the Act) and a

penalty of Rs. 17,821 was levied u/s 16(2) of the Act after due notice.

The assessee preferred an appeal to the Appellate Assistant Commissioner, Pollachi, who by his order dated 17th June, 1976, sustained the

suppression to the extent of Rs. 5,68,037.26 but struck down the levy of penalty of Rs. 17,821 on the ground that the authority has not recorded a

finding that there was wilful non-disclosure of assessable turnover. Not satisfied with this order the assessee filed an appeal to the Sales Tax

Appellate Tribunal (Additional Bench), Coimbatore. The Tribunal, after perusing the slips in question, found that the assessee had suppressed

purchase of raw materials as in slips Nos. 1 to 3 and 8 to 12 and as such the assessing authority was justified in making a revision of the

assessment u/s 16(1) of the Act. As regards the correct figure of purchase suppression the Tribunal found that it is Rs. 60,067.45. Adding the

gross profit of Rs. 54,010.05, the taxable turnover was determined at Rs. 41,14,077.50. Adding this with the turnover originally taken for

assessment, the Tribunal found the taxable turnover as Rs. 17,65,207 for the year 1969-70. On this 3 per cent levy of sales tax was imposed.

The Tribunal next took the issue regarding the penalty imposed by the assessing authority, which was ultimately set aside by the Appellate

Assistant Commissioner on the ground that there was no specific finding of wilful non-disclosure of the assessable turnover in the order of

assessment for levy of penalty u/s 16(2) of the Act. The Tribunal, pointing out the word ""suppression"" used by the assessing authority in respect of

the non-disclosure of taxable turnover, held that it has to interfere with the order of the Appellate Assistant Commissioner setting aside the order of

levy of penalty. The Tribunal after hearing the authorised representative who, according to the Tribunal, finally prayed for leniency in the quantum,

levied penalty u/s 16(2) of the Act, with regard to the quantum, the Tribunal held that a penalty equivalent to 50 per cent of the tax due on the

suppressed turnover will be sufficient and on that basis, levied a penalty of Rs. 6,211. The present revision is filed by the assessee in respect of the

figure arrived at as regards the escaped turnover and in respect of the penalty levied by the Tribunal.

T.C.No. 164 of 1978 :

This tax revision case has also been filed by the petitioner in T.C. No. 165 of 1978 in respect of the assessment for the year 1971-72.

Originally, the assessee was assessed on the total taxable turnover of Rs. 14,58,679.82. On 20th July, 1971, the Central Intelligence Wing of the

Sales Tax Department inspected the business premises. On verification of certain slips and account books recovered the assessing authority found

that the assessee had suppressed a sales turnover of Rs. 27,65,324.05. Adding this amount with the turnover originally assessed, the assessing

authority found the total taxable turnover at Rs. 42,22,003.87. On this figure, tax was levied u/s 16(1) of the Act and penalty of Rs. 1,45,180 was

also levied u/s 16(2) of the Act after issue of notice. Aggrieved by this order of the assessing authority, the assessee preferred an appeal to the

Appellate Assistant Commissioner, Pollachi, who after verifying the accounts and slips recovered, held that the assessee had suppressed a sales

turnover of Rs. 6,90,988 and ordered assessment on this turnover at 3 1/2 per cent but struck down the penalty imposed by the assessing

authority for want of a finding that there was a wilful non-disclosure for the assessable turnover by the assessee. Aggrieved by this order, the

assessee preferred an appeal before the Sales Tax Appellate Tribunal (Additional Bench), Coimbatore. The Tribunal, after hearing the arguments

and going through the recovered slips and accounts, confirmed the suppressed turnover arrived at by the Appellate Assistant Commissioner. The

Tribunal held that the turnover up to 18th June, 1971, was liable for assessment at 3 per cent while the turnover from 19th June, 1971, was liable

for assessment at 3 1/2 per cent. Finally, the Tribunal determined the total taxable turnover at Rs. 21,47,668 and levied tax both at 3 per cent and

at 3 1/2 per cent.

The Tribunal next took up the question as to whether the Appellate Assistant Commissioner was justified in setting aside the levy of penalty. For

the same reasons as set out in the prior appeal, which is the subject-matter of T.C. No. 165 of 1978, the Tribunal held that penalty is leviable and

such a penalty will be equivalent to 50 per cent of the tax due on the suppressed turnover of Rs. 6,90,998 and calculating the penalty, the Tribunal

levied a sum of Rs. 10,797, and the very same questions that were raised in T.C. No. 165 of 1978 were raised in this revision also.

Mr. P. R. Ranganathan, learned counsel appearing for the assessee in both these cases, stresses his argument only on the question of penalty

and submitted that the Tribunal has no power to levy the penalty when especially the Appellate Assistant Commissioner has deleted the penalty. It

is clear from the facts of the case that the penalty originally levied had been deleted by the Appellate Assistant Commissioner. According to Mr. P.

R. Ranganathan, learned counsel for the assessee in both the cases, the Tribunal cannot impose penalty when especially the penalty levied by the

assessing authority has been set aside by the Appellate Assistant Commissioner. Mr. P. R. Ranganathan contended that the Tribunal, on the facts

of the present cases has no power to levy penalty u/s 36(3)(a)(i) of the Act.

In State of Tamil Nadu v. Jakthi Veliyeetakam [1977] 40 STC 466 a Division Bench of this Court, while dealing with similar facts, observed as

follows :

For the word ''enhance'' to apply, there must be something to be increased. In this case, since the Appellate Assistant Commissioner has set aside

the very order of penalty, there was no penalty to be increased. To enhance the penalty already imposed is different from restoring the penalty

which was imposed by the original authority but set aside by the Appellate Assistant Commissioner since the subject-matter of the appeal before

the Tribunal is the order of the appellate authority only and not the order of the original authority. Consequently, an application for restoration of

the penalty in the present case will not come within the scope of section 36(3)(a)(i) of the Act and, therefore, the Tribunal was right in not restoring

the order of penalty though the reasons given by the Tribunal for doing so are different. Hence the tax revision case is dismissed.

As far as the present cases are concerned, it is the assessee who has filed the revision petitions both on the ground that the determination of the

taxable turnover is erroneous and on the ground that the Tribunal has no power to restore the penalty when especially the Appellate Assistant

Commissioner has completely set aside the penalty levied u/s 16(2) of the Act. It is clear from the facts of the case that the State has not preferred

any appeal to the Tribunal against the order of the Appellate Assistant Commissioner setting aside the penalty levied by the assessing authority. The

provision of section 36(3)(a)(i) of the Act can be exercised to confirm, reduce, enhance or annual the assessment or penalty .Inasmuch as the

Appellate Assistant Commissioner has completely set aside the penalty there is nothing for the Tribunal to enhance. Thus, the decision cited above

applies on all fours to the facts of the present case. Hence we are of the view that the levy of penalty by the Tribunal cannot be sustained.

Accordingly, both the revisions have to be allowed in respect of the penalty levied by the Tribunal. We do not find any warrant to interfere with the

rest of the finding of the Tribunal and further, no argument was advanced by the learned counsel for the assessee in regard to the rest of the finding

of the Tribunal.

For the foregoing reasons, the order of the Tribunal in so far as it relates to the imposition of penalty is concerned, is set aside and confirmed in

other respects, costs one set. Counsel''s fee Rs. 250.

Petition allowed.