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2008 DIGILAW 4150 (MAD)

L. K. S. JEWELLERS v. STATE OF TAMIL NADU.

2008-11-11

K.K.SASIDHARAN, PRABHA SRIDEVAN

body2008
ORDER K. K. SASIDHARAN J. - This tax case is at the instance of the assessee having aggrieved by the order passed by the Tamil Nadu Sales Tax Appellate Tribunal in STA No. 68 of 2001. Substantial questions of law : "(1) Whether the order of the Appellate Tribunal is correct in reversing the order of the Appellate Assistant Commissioner and sustaining the levy of tax on the alleged sales turnover of gold jewellery in assessment year TNGST 1996-97, when the alleged excess gold jewellery of 16.428 kgs seized by the Directorate of Revenue Intelligence of the Income-tax Department on January 30, 1997 were returned to the petitioner only on March 17, 1998 ? (2) Whether the Appellate Tribunal being a final fact-finding authority is correct in sustaining the levy of tax on the alleged sales turnover of gold jewellery when the fact remains that the alleged excess stock seized on January 30, 1997 was returned to the petitioner only on March 17, 1998 and so the petitioner would not have effected sales out of the alleged excess stock during the assessment year 1996-97 itself ? (3) Whether the Appellate Tribunal is correct in sustaining the levy of purchase tax under section 7A on the gold jewellery brought from other State on approval receipt ? (4) Whether the Appellate Tribunal is correct in invoking section 7A of the TNGST Act when there was no proof to show that gold jewellery brought from other States were manufactured out of the worn-out jewellery obtained from undisclosed sources ? (5) Whether the Appellate Tribunal is correct in sustaining the levy of penalty under section 12(3)(b) of the TNGST Act in the absence of a best of judgment assessment ?" The factual matrix necessary for the disposal of the tax case are as under : The petitioner is a dealer in gold and silver jewellery and is an assessee on the file of the Commercial Tax Officer, Sowcarpet. For the assessment year 1996-97 the dealers have reported a total and taxable turnover of Rs. 2,13,21,003 and Rs. 1,96,58,099, respectively in form A1 returns. The dealers have claimed exemption on second sale of gold jewellery, second sale of diamonds as well as sale of readymade thali made of gold, not exceeding eight grams in weight inclusive of all attachments but without chain. 2,13,21,003 and Rs. 1,96,58,099, respectively in form A1 returns. The dealers have claimed exemption on second sale of gold jewellery, second sale of diamonds as well as sale of readymade thali made of gold, not exceeding eight grams in weight inclusive of all attachments but without chain. While so, the place of business of the assessee was searched by the officers of the Revenue Intelligence, Income-tax Department, Chennai on January 30, 1997. In the said search, 16.428 kgs. of gold jewellery were seized from the business premises of the dealer representing excess jewellery. The said jewellery was recorded as "approval receipt" from Deeveesha Ornaments, Nellore and Shanthilal Jewellers, Nellore in the documents. In view of the said record, the officials of the revenue intelligence searched the premises of Deeveesha Ornaments and Shanthilal Jewellers and in the enquiry, the mandate holder of Shanthilal Jewellers deposed that he used to supply gold jewellery to the assessee. However the proprietor of Deeveesha Ornaments deposed that he had not given any jewellery to the assessee on approval basis but he gave only accommodation vouchers so as to make the documents appear as if jewellery was handed over by the said jeweller on approval basis. The Income-tax Department found that the assessee was dealing in gold, without accounting the same and ultimately the dealers themselves disclosed the undisclosed income as Rs. 26,34,015 representing the value of excess gold jewellery found and seized at the time of raid by the income-tax authorities. The assessing authority having found that the dealers have admitted the undisclosed income of Rs. 26,34,015 before the income-tax authorities treated the said amount as "suppressed sales turnover" for the year 1996-97 and the assessment was completed accordingly by way of best of judgment assessment. While making the assessment, besides including the amount shown as undisclosed income, the assessing officer also added 70 per cent of the said amount being the value of old beaten/wornout jewellery used in the manufacture of new gold jewellery purchased from undisclosed sources and tax was levied as provided under section 7A of the Tamil Nadu General Sales Tax Act, 1959. Accordingly the total suppression was worked out and the assessment was re-determined. The assessing officer also imposed penalty and concluded the assessment as per order dated December 21, 1999. The order of the assessing authority was taken up in statutory appeal before the Appellate Assistant Commissioner. Accordingly the total suppression was worked out and the assessment was re-determined. The assessing officer also imposed penalty and concluded the assessment as per order dated December 21, 1999. The order of the assessing authority was taken up in statutory appeal before the Appellate Assistant Commissioner. Before the Appellate Assistant Commissioner, the assessee produced documents evidencing return of gold jewellery by the Income-tax Department on March 17, 1998 and pleaded that there was no justification for determining the sales suppression for the assessment year 1996-97. The assessee also submitted that the gold jewellery returned on March 17, 1998 has already been accounted for immediately after such receipt and the same was also shown in the accounts for the assessment year 1997-98 and tax was also paid accordingly and as such the very basis for determining the sales turnover treating it as sales suppression by the assessing officer was unjustified. The assessee also attempted to explain the possession of 16.428 kgs. of gold jewellery as according to the assessee the same was handed over only by the dealers of Nellore by way of approval. The case of the assessee with regard to the receipt of the gold jewellery on March 17, 1998 as well as the accounting of those jewellery during the year 1997-98 were considered by the Appellate Assistant Commissioner and taking into account, the fact that the jewellery was returned only on March 17, 1998 and as such there was no possibility of effecting sales during the assessment year in question, the Appellate Assistant Commissioner set aside the finding with regard to sales suppression. With regard to the purchase omission, the Appellate Assistant Commissioner considered the statement given by the jewellers who have supplied the goods in question by way of approval, but however observed that, half of the excess noticed in the place of business would be reasonably viewed as goods received on approval receipt basis and the next half of the excess stock should be taken as goods received from unknown sources and accordingly the estimation of the purchase value by assessing officer at Rs. 19,21,304 was reduced to Rs. 8,10,652. The penalty imposed by the assessing officer was confirmed only to the extent of re-fixation of the purchase value of worn out jewellery. 19,21,304 was reduced to Rs. 8,10,652. The penalty imposed by the assessing officer was confirmed only to the extent of re-fixation of the purchase value of worn out jewellery. The order dated June 27, 2000 on the file of the Appellate Assistant Commissioner was challenged by the Revenue before the Sales Tax Appellate Tribunal. The Tribunal was of the opinion, that the fact that the assessee received the gold jewellery from the Income-tax Department on March 17, 1998 and their act of including the turnover of the said jewellery for the subsequent assessment year would absolve them from the offence, but that cannot be a reason to say that they are not liable for sales suppression. The Tribunal also set aside the action of the Appellate Assistant Commissioner with respect to re-fixing the turnover and observed that in the absence of any documentary evidence, the finding of the Appellate Assistant Commissioner to the effect that proportionate purchase was made from Shanthilal Jewellers of Nellore was perverse. Accordingly, the Tribunal restored the order of assessment as made by the assessing officer, including levy of penalty. Aggrieved by the order of the Sales Tax Appellate Tribunal, the assessee has filed the present tax case. It is found from the materials available on record as well as additional papers submitted by the learned counsel for the assessee that the gold in question was returned to the assessee only on March 17, 1998. There is a reference about the factum of such return in the assessment order. Even in the objection submitted to the pre-assessment notice, the assessee has stated that the gold jewellery was returned to them only on March 17, 1998 and as such it was not possible for them to sell the jewellery for the assessment year 1996-97. The accounts produced by the assessee for the assessment year 1997-98 also shows that the gold received on March 17, 1998 was duly accounted for and they have also paid sales tax for the assessment year 1997-98. In the grounds of appeal against the order of the Appellate Assistant Commissioner, the Department has also admitted about the factum of return of the gold ornaments on March 17, 1998. There was no challenge made by the Department at any point of time that the gold was returned only during the assessment year in question. In the grounds of appeal against the order of the Appellate Assistant Commissioner, the Department has also admitted about the factum of return of the gold ornaments on March 17, 1998. There was no challenge made by the Department at any point of time that the gold was returned only during the assessment year in question. Therefore the Tribunal was not justified in setting aside the finding of the Appellate Assistant Commissioner with respect to the sales turnover. The learned Special Government Pleader would submit that an opportunity should be given to the Tribunal to consider the documents now produced by the assessee so as to ascertain as to whether the gold ornaments were returned only on March 17, 1998. But we are of the opinion that such a course is absolutely not necessary inasmuch as the very documents were produced by the assessee before the assessing authority as well as before the Appellate Assistant Commissioner as is evident from the averments in the respective orders of the assessing authority as well as appellate authority. The said fact is also found from the grounds of appeal filed by the Department before the Tribunal wherein they have clearly admitted about the receipt of the jewellery on March 17, 1998. In such circumstances, we are of the considered view that the Tribunal was not justified in setting aside the finding with regard to suppression of turnover. Accordingly, the substantial questions of law Nos. 1 and 2 are decided in favour of the assessee and against the Department. The Appellate Assistant Commissioner though found that no evidence was produced by the assessee to prove that the jewellery was received by them on approval basis, still reduced the purchase omission by 50 per cent and the said finding has absolutely no factual basis. The statements recorded from the two jewellers clearly show that they have not supplied the goods in question to the assessee. The statement of the representative Shanthilal Jewellers was to the effect that they used to supply gold ornaments to the assessee on approval basis cannot be taken as proof that the jewellery in question was actually supplied by the said jeweller. Similarly Deeveesha Ornaments also disposed to the effect that they have not supplied the goods in question to the assessee. Similarly Deeveesha Ornaments also disposed to the effect that they have not supplied the goods in question to the assessee. Therefore it was evident that the assessee was liable for purchase suppression and as such the assessing authority was justified in making the assessment on the ground of such wilful suppression and the said finding was set aside by the Appellate Assistant Commissioner without any basis. In such view of the matter, we do not find any reason to disagree with the order of the Tribunal setting aside the finding with regard to the purchase omission. Accordingly, the substantial question of law Nos. 3 and 4 are decided against the assessee and in favour of the Department. The assessing officer has also levied penalty under section 12(3)(b)(i) of the Act. In view of our finding that there was no sales suppression as found by the Appellate Assistant Commissioner, penalty is confirmed only to the extent of purchase omission and as indicated in the order of the assessing authority and accordingly the last substantial question of law is answered partly in favour of the assessee and partly in favour of the Department. The assessing officer is directed to re-determine the penalty as indicated above. The tax case is allowed in part to the extent indicated above.