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Sri Ambika Casting Industrial Works v/s State of Tamil Nadu

    Tax Case No. 383 of 1983 in Revision No. 147 of 1983

    Decided On, 30 June 1983

    At, High Court of Judicature at Madras


    P. Abboy, Advocate.

Judgment Text


The assessee in this case is a dealer in and manufacturer of casting materials like flour mill parts, rice huller parts, etc. It reported a taxable turnover of Rs. 5, 39, 797.27 in its A2 returns for the year 1977-78 after claiming exemption on a turnover of Rs. 82, 546.41. The Deputy Commercial Tax Officer, Inspecting Wing I, inspected the place of business of the assessee on 10th June, 1977 and found that the accounts were written upto 9th June, 1977. He also took stock for certain items. Those items were verified with reference to the accounts and he found certain deficiency of the stocks. Again there was an inspection on 2nd February, 1978. At this stage, there was again a physical verification of the stocks and there was a certain deficiency of stocks. There was again an inspection of the premises on 15th December, 1977 when it was found that the assessee was not maintaining the stock and production accounts upto-date. Certain records and slips were also recovered. Out of the slips recovered from the assessee, slips Nos. 1 to 21, 39 and 44 and a pocket note-book revealed that the dealer had advanced money to labourers to the extent of Rs. 12, 613.87 and these payments to labourers have not found place in the assessee's regular accounts. Taking that fact into consideration, the assessing authority felt that since the sum of Rs. 12, 613.87 found in some of the slips were not accounted for in the regular account books, it should be taken to be payments made by the assessee for the manufacture of certain stocks which should have been dealt with by the assessee outside its accounts. Though the assessee contended, at this stage, that it had engaged labourers only though the contractors and those slips had been maintained only by the contractors, the assessing authority held that the dealer was found to have engaged labourers personally for production purposes and that the labourers were not shown to have been engaged by any contractor to do the work involved in the manufacture of machinery parts. Having regard to the fact that the slips covered only a few days in the year, the suppression of production of the spare parts for the whole year was estimated at Rs. 56, 071. In respect of this addition, a penalty under section 12(3) also was levied. The assessee questioned the addition as well as the levy of penalty in its appeal before the Appellate Assistant Commissioner. That appeal was allowed in part where the appellate authority reduced the penalty as equal to the tax suppressed, that is, to the sum of Rs. 2, 803. When the matter was taken to the Tribunal, sustained the addition of Rs. 56, 071 on the ground that it represented the suppressed transactions. It also sustained the levy of penalty at Rs. 2, 803. In this tax case, the assessee only questions the order of the Tribunal so far as it relates to the levy of penalty.According to the learned counsel for the assessee, in this case, the assessee gave an explanation as to why the slips which formed the basis of the addition of Rs. 56, 071 do not relate to it and that those are the slips maintained by its contractors. That explanation was not accepted by the authorities all through, including the Tribunal. As a matter of fact, the learned counsel for the assessee does not question the order of the Tribunal so far as it sustained the addition of Rs. 56, 071. What is contended by the learned counsel for the assessee is that, in any event, the penalty cannot be levied as suppressions have not bee duly proved and the mere fact that the assessee's explanation with regard to the slips was not accepted by the authorities will not automatically lead to the inference that the assessee is actually guilty of any suppression. The learned counsel, in support of the said submission, relies on the decision of this Court in State of Tamil Nadu v. Thangadurai. In that case, the assessee's explanation for certain incriminating documents was taken into account for sustaining a best judgment assessment. But in the matter of levy of penalty, this Court has held that the fact that the assessee is not able to explain certain documents will not ipso facto lead to the fact that the assessee has wilfully suppressed the turnover. In that case, the assessee was treated as a dealer in groundnut oil by the assessing authority rejecting the assessee's contention that he was only a broker and not a dealer in respect of the transactions in the relevant year. The assessing authority proceeded to make the assessment treating him as a dealer. In the circumstances, this Court held that in order that penalty may be imposed under section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, it must be possible first to come to the conclusion that there was actually a turnover and further that the turnover was not disclosed by the assessee, that merely because the assessee is a best judgment assessment the levy of penalty is not automatic and that the considerations to be taken in connection with assessment are different from the considerations which have to weight in the matter of penalty. In that case, if the assessee's explanation that he was a broker had been accepted there would not be any room for making a best judgment assessment. Since the assessee's explanation went to the root of the matter, that is regarding his assessability to sales tax under the Tamil Nadu General Sales Tax Act, it was held by this Court that merely because a best judgment assessment came to be made after rejecting the explanation given by the assessee, it will not ipso facto lead to the fact that the assessee has suppressed the turnover. In this case, the facts are quite different. Here, the assessee's status as a dealer has not been and cannot be disputed. Three had been inspection of the assessee's place of business more than once and on every occasion stock deficiency had been found. In addition, slips have been found to indicate that the assessee has been making disbursements towards labour charges. Unless the assessee has engaged labourers for production, it would not have paid for the labour. The presence of slips in the assessee's premises was sought to be explained by saying that they belonged to somebody else and not to its business. It was, however, not accepted by the authorities below. It cannot be stated that section 12(3) cannot be invoked. If penalty should be levied only when there are actual suppressions, the scope of section 12(3) would be con

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siderably restricted, for, every assessee will give some explanation or other to sustain his plea that there are no suppressions and merely on the basis of the explanation given, it cannot be said that section 12(3) cannot be invoked. In this case, admittedly, the assessee is a dealer and slips have been found in its place of business. Its explanation that the slips belong to somebody else has not been believed and there was no estimate of suppressions by the assessing authority which has been sustained by the Tribunal.In these circumstances, we do not see any reason why section 12(3) cannot be involved. We are, therefore, not in a position to interfere with the order of of the Tribunal. The tax case is dismissed.