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2016 DIGILAW 947 (KER)

Aboobacker v. State of Kerala

2016-11-04

DEVAN RAMACHANDRAN, THOTTATHIL B.RADHAKRISHNAN

body2016
ORDER : DEVAN RAMACHANDRAN, J. 1. These revisions have been filed by the assessee, who is a registered dealer in cement on the rolls of the Office of the Commercial Tax Officer, Kozhikode. 2. The assessee was subjected to an audit visit, wherein it was noticed that he had filed untrue and incorrect returns for the months of June to March 2012. It was seen that even though the books of account maintained by the assessee showed substantial purchases and sales, the assessee had filed the return showing nil sales for the whole assessment year, except for the months of April and May, 2012. A proposal was, thereafter, made to assess the suppressed turn over which was determined by adding gross profits with the assessed turnover, which was finalised after rejecting the contentions of the assessee to the pre-assessment notice. 3. Since it was found that the assessee had filed fallacious returns, a penalty of Rs.33,51,750/-, being the double tax sought to evaded, was also imposed under Section 67 of the Kerala Value Added Tax Act (‘the Act’ for short). The assessee filed two appeals under Section 60 of the Act for the assessment year 2011-12, the first against the order of the best judgment assessment completed by the Assessing Authority under Section 24 of the Act and the second against the order of penalty imposed under Section 67 of the Act. The appeal filed by the assessee against the order confirming the best judgment assessment was dismissed and the appeal filed against the order of penalty was modified substantially by the First Appellate Authority directing the assessing authority to quantify the turn over, for the sole purpose of quantification of the penalty, after verification of the documents, including purchase bills. The orders of the First Appellate Authority was challenged by the assessee before the Kerala Value Added Tax Appellate Tribunal, Additional Bench, Kozhikode (‘the Tribunal’ for short). However, the Tribunal dismissed the appeals confirming the orders of the First Appellate Authority. 4. The assessee has filed the above revisions impugning the common order passed by the Tribunal. We see that several contentions were raised by the assessee before the Tribunal. The Tribunal had proceeded to consider each one of them in great detail. However, the Tribunal dismissed the appeals confirming the orders of the First Appellate Authority. 4. The assessee has filed the above revisions impugning the common order passed by the Tribunal. We see that several contentions were raised by the assessee before the Tribunal. The Tribunal had proceeded to consider each one of them in great detail. It was noticed by the Tribunal that the assessee had filed the return showing zero sales and purchases for a continuous period of ten months and that they had sought to explain it for the reason that they had done so to avoid penal action for failure to file return within the stipulated time. The Tribunal noticed specifically, contrary to the assertion of the assessee, that the return filed by the assessee was not merely incorrect due to inadvertence, but that it was deliberately done, so as to avoid payment of tax for the relevant months, as had been admitted by the assessee in their statement before the Assessing Officer. 5. The petitioner has raised several questions law. The gravamen of the questions in O.T.Rev.No.71/2016, which is the revision filed against the order confirming assessment is whether the assessing authority was justified in treating the accounted transactions as suppression; whether the assessing authority was justified in not allowing to revise the incorrect return filed by the assessee and whether the Tribunal was in error in not allowing input tax credit as disclosed by the accounts maintained by the assessee. Apropos O.T. Rev. No.72/2016, which is against the order of penalty imposed, the questions raised are essentially as to whether the order of penalty under Section 67 of the Act was justified since the transactions were accounted in the books of account of the assessee and whether penalty was leviable when the turn over and transactions were disclosed in the account. 6. We have carefully considered the impugned order of the Tribunal. We see, in paragraph 4 of the order, that the Tribunal has considered various assertions of the assessee and has found that the assessee having deliberately filed an untrue return showing the sales and purchases to be zero when, in fact, there was substantial turn over, he was, thereafter, not entitled to the benefit of Section 23(6)(a) or Section 22 of the Act. The Tribunal has concluded so for legally justifiable theorization since this was not a case where the assessee had omitted to file return but it was a case where the assessee, admittedly, filed an untrue and incorrect return. 7. The Tribunal, being the final statutory authority for assessment of facts, we see no reason, in view of the elaborate consideration of all relevant factors, documents and materials on record, to interfere in any manner with the findings of the Tribunal. 8. We are, therefore, of the opinion that the order of the First Appellate Authority in the matter of penalty proceedings, which has the effect of reducing the quantum substantially, since the turn over, for the purpose of quantification of penalty, has been directed to be assessed after verification of the documents, has already afforded the petitioner substantial relief. We see no further reason to modify the said order. 9. Quad hoc O.T.Rev.No.71/2016, which is against the order of the Tribunal confirming the appellate order of the First Appellate Authority approving the assessment order of the Assessing Authority under Section 24 of the Act, the assessee contends that they ought to have been allowed by the Assessing Authority to revise the incorrect return filed by them, since all the transactions were actually accounted in the books of account and no variation in the stock was found. The petitioner asservates that the Assessing Authority erred in not allowing them to revise the return either under Section 22(2) or under Section 42(2) of the Act. The petitioner also contends that the assessing authority was not justified in not allowing the benefit of input tax credit as per their books of account. 10. To clearly comprehend the contention of the petitioner, it will be appropriate that sub-section (2) of Section 22 of the Act be looked carefully. The said subsection reads as follows: “A dealer whose return is rejected under sub-section (1) may, file a fresh return curing the defects in such manner and within such time as may be prescribed and accompanied by such documents as provided under sub-section (1) of section 20 together with proof of payment of interest on the tax payable at the rates provided under section 31 for the period from the due date of filing of return till the date of filing of such fresh return. On the receipt of such return by the assessing authority, the assessment for the return period shall, subject to the provisions of section 24 and section 25, be deemed to have been completed.” As is perspicuous from the sub-section, a dealer will be able to file a fresh return only if the returns filed by him are rejected under sub-section (1) of Section 22 of the Act. Sub-section (1) of Section 22 of the Act reads as under: “Where the return submitted under sub-section (1) of Section 20 is not in the prescribed manner or not accompanied by the prescribed documents or with incorrect particulars, the assessing authority shall, after recording its reasons, reject the return with due notice to the dealer.” It is obvious from the two sub-sections above of Section 20 that it is only when the return submitted is not in the prescribed manner or not accompanied by the prescribed documents or it is submitted with incorrect particulars, causing the Assessing Authority to reject the return, that the assessee would obtain the opportunity to file a fresh return curing the defects. However, in the case at hand, the petitioner had filed the return with wrong disclosures for the purpose of escaping from the rigor of paying the tax and as we have noticed above, this is admitted by the petitioner himself. That being so, this is not a case where his returns have been rejected by the Assessing Authority for the technical reasons as are enumerated in Section 22(1) of the Act, but is a case where it was rejected for having been filed with confutative intentions. It is, therefore, ineludible that the petitioner cannot thereafter be heard to say that he should have been given an opportunity under Section 22(2) of the Act for filing a fresh return curing the defects. This is more so because, what the petitioner wants to cure is not the defects in his returns but deliberately entered wrong information in it knowing it to be untrue and for such purpose, he cannot be given an opportunity nor can such plea be condoned in law. We have, therefore, no doubt in our mind that the petitioner, after having filed a specious return, cannot be allowed to have the benefit of filing a fresh return under Section 22(2) of the Act. We have, therefore, no doubt in our mind that the petitioner, after having filed a specious return, cannot be allowed to have the benefit of filing a fresh return under Section 22(2) of the Act. As regards his contention regarding Section 42(2) of the Act, that section relates to the filing of the annual return and is not applicable to the facts of this case, since, here the petitioner was required to file monthly returns within time. 11. It is incontrovertible from the established and admitted facts that the assessee had filed a conter-factual untrue return deliberately in order to avoid payment of tax even though the transactions were entered in the books of account. The inclusion of transactions in the books, as has been rightly concluded by the Tribunal, would not absolve the assessee from its liability to file true and correct returns. The assessee did not even attempt to file revised returns within the time permitted under Rule 22(4A) of the Kerala Value Added Tax Rules. It had, on the contrary, applied to revise the return only after the audit was completed and the fraud detected. The Tribunal, therefore, held that there was no error on the part of the Assessing Authority in not allowing the assessee to revise the returns as requested by them. We have also noticed above that since the returns of the petitioner were not rejected for the reasons related to Section 22(1), his application to file a fresh return under Section 22(2) was also completely untenable and without legal support. 12. As regards the denial of input tax credit, the Tribunal relied on the judgment of this Court in Venus Marketing v. State of Kerala (2011 (3) KLT SN 133 (C.No.135)), wherein this Court has already declared that benefits like input tax credit should be made available to the dealers conforming to the statutory provisions in regard to maintenance of accounts, filing of returns and remittance of tax and eligibility for input tax credit is not a matter to be considered when suppression is detected. This Court has also cautioned that “the department should be slow to grant concessions and benefits like input tax credit for dealers who are involved in tax evasion and benefit should be given strictly in accordance with the provisions of the Act and Rules”. This Court has also cautioned that “the department should be slow to grant concessions and benefits like input tax credit for dealers who are involved in tax evasion and benefit should be given strictly in accordance with the provisions of the Act and Rules”. The Tribunal, therefore, found that since the assessee had suppressed the turn over in its return, no benefit could be given to it in view of the affirmative findings of this Court in Venus Marketing (supra). 13. We see that the Tribunal has exercised its jurisdiction without error and fittingly and hence, the order impugned in these revisions would warrant no interference. 14. Faced with the situation as above, the appellant, as a matter of last resort, pleaded that since the order of penalty has been modified to reckon the turn over, by verification of the documents, including the purchase bills, same benefit may also be extended in the case of regular assessment. In normal circumstances, this prayer should not and cannot be countenanced, the factum of suppression having been proved and established by the very fact that the assessee had filed returns showing incorrect figures. 15. However, we note that in this particular case, the orders of penalty have been modified by the First Appellate Authority directing the Assessing Authority to assess the tax after verification of the documents and books of account maintained by the assessee. The particular circumstances of this case is that the assessee had maintained true and correct books of account, but had deliberately filed incorrect returns for the reason, according to him, that he wanted to delay the payment of tax. This attitude of the petitioner or any other assessee can never be countenanced and condoned and requires to be deprecated in the strongest manner as is available. However, the fact that no omission or suppression was seen in the books of account maintained by the appellant at the time of the order and that there are no specific observations in the order of penalty noticing such omissions or suppressions, we are of the view that the petitioner can be granted a certain amount of leniency to meet the ends of justice. 16. 16. We think that Assessing Authority can be directed to assess the tax sought to be suppressed by the assessee by verification of the books of account maintained by it, including the purchase bills that the petitioner may produce before it. We are inclined to make this order only in the peculiar and particular circumstances of this case without making it a precedent in any manner, to apply in any other case, at any other point of time and only for the purpose of securing justice noticing that the assessee has made full and true declarations in his books of account. We must hasten to add that we see no infirmity in the orders of the Tribunal or the First Appellate Authority in making the assessment as it has done but we are issuing certain directions in this order only for the singular purpose of obtaining some leniency to the petitioner only because they have maintained true accounts and because they had made full disclosure before the Audit and Assessing Authorities. We are offering this latitude to the petitioner since the disclosures made by him in the accounts and before the Authorities have been found to be correct and true. We, therefore, deem it appropriate to allow the petitioner a further chance on condition that it remits an amount of Rs.1,00,000/- as costs to be paid to the respondent within a period of fifteen days from the date of receipt of a copy of this order. Such payment of costs to the respondent shall be made through the Office of the Commercial Tax Officer, Kozhikode. On such payment being made, the Assessing Authority will assess the tax for the year 2011-12 after verifying the books of account maintained by the petitioner including the purchase bills and other relevant documents. This order will, however, have no impact on the penalty imposed and the same would stand confirmed. In the result, O.T.Rev.No.71/2016 is allowed in part and O.T.Rev.No.72/2016 is dismissed.