IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE A.M.SHAFFIQUE TUESDAY, THE 29TH NOVEMBER 2011 / 8TH AGRAHAYANA 1933 WP(C).No. 23702 of 2003(V) ----------------------------------------------- PETITIONER: ------------------ M/S. ALAPPAT FASHION JEWELLERY, MAVOOR ROAD, KOZHIKODE, REPRESENTED BY P.R. FRANCIS - MANAGING PARTNER. BY ADV. SRI.ANIL D. NAIR SRI.NIVEDITA A.KAMATH RESPONDENT(S): ------------------------- 1. THE INTELLIGENCE OFFICER, SQUAD NO.I, COMMERCIAL TAXES, KOZHIKODE. 2. COMMISSIONER OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 3. THE DEPUTY TAHSILDAR (.R.R.), TALUK OFFICE, KOZHIKODE. BY SPL. GOVERNMENT PLEADER (TAXES) SHRI SOJAN JAMES. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29/11/2011 ALONG WITH ST. REV.CASE NO.252 OF 2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX IN W.P.(C).NO.23702 OF 2003 V PETITIONER'S EXHIBITS: EXT.P1 TRUE COPY OF SHOP INSPECTION REPORT NO.348219 PREPARED BY THE IST RESPONDENT. EXT.P2 TRUE COPY OF NOTICE U/S. 45A DATED 21.11.2001 ISSUED BY THE INSPTG. ASST. COMMR., KOZHIKODE. EXT.P3 TRUE COPY OF REPLY DATED 11.12.2001 SUBMITTED BY THE PETITIONER TO 1ST RESPONDENT. EXT.P4 TRUE COPY OF PENALTY ORDER DATED 7.1.2002 OF THE 1ST RESPONDENT. EXT.P5 TRUE COPY OF REVISION ORDER DATED 7.8.2002 OF DY. COMMR., KOZHIKODE. EXT.P6 TRUE COPY OF REVISION ORDER PASSED BY THE 2ND RESPONDENT DATED 10.6.2003. EXT.P7 TRUE COPY OF FIRST REVISION PETITION DATED NIL. FEB., 2002 SUBMITTED BY THE PETITIONER. EXT.P8 TRUE COPY OF SECOND REVISION PETITION DATED 27.9.2002 SUBMITTED BY THE PETITIONER. EXT.P9 TRUE COPY OF ORDER DATED 3.4.2002 OF THE 1ST REVISIONAL AUTHORITY. EXT.P10 TRUE COPY OF JUDGMENT DATED 12.12.2002 IN O.P.NO.37615/2002 OF THIS HONOURABLE COURT. EXT.P11 TRUE COPY OF SHOP INSPECTION REPORT NO.343418 DATED 28.10.98 PREPARED BY 1ST RESPONDENT. RESPONDENTS' EXHIBITS; NIL. // TRUE COPY// PS TO JUDGE K.M. JOSEPH & A. M. SHAFFIQUE, JJ. ----------------------------------------- W.P.(C).NO.23702 OF 2003 V & ST. REV.CASE NO.252 OF 2010 ------------------------------------------ Dated this the 29th November, 2011 JUDGMENT K.M. Joseph, J. The Writ Petition and the St. Rev. Case being connected, they are disposed of by this common Judgment. 2. On the basis of an inspection conducted in the premises of the writ petitioner which is also the petitioner in the St. Rev. Case, the Intelligence Officer found out stock variation both in respect of new and old gold ornaments. Thereafter, after issuing notice and affording an opportunity of hearing to the petitioner, the Intelligence Officer imposed a penalty of Rs.1,50,000/= which was twice the amount of tax sought to be evaded, vide Ext.P4 produced in W.P.(C).No.23702/2003. Ext.P5 is the order passed by the first appellate authority. Therein, the Deputy Commissioner has reduced the penalty from double the tax to 1 ½ times the tax sought WPC.23702/03V & ST.REV.252/10 2 to be evaded. The petitioner was unsuccessful with his revision filed before the Commissioner for Commercial Taxes as is evident from Ext.P6 order. Petitioner in the Writ Petition accordingly challenges Exts.P4 and P6 orders. 3. For the assessment year 2001 - 2002, the assessing authority proposed to reject the return of the petitioner, taking note of the stock variation and the penalty imposed on the said basis by the Intelligence Officer. Notice was given. Reply was given by the petitioner. Rejecting the contention, the assessment was completed, finding that the assessment is to be completed by adopting the proposed method of running stock. Petitioner carried the matter in appeal. By Annexure B order in the St. Rev. Case, the Deputy Commissioner (Appeals) granted relief to the petitioner by adopting the method of three times of the suppression worked out by the Intelligence Officer. Petitioner carried the matter before the Sales Tax Appellate Tribunal. The Appellate Tribunal allowed the Appeal partly and further reduced the returned turnover from WPC.23702/03V & ST.REV.252/10 3 three times of the suppressed turnover to two times of the suppressed turnover. Petitioner has also a case that there is no finding that there is an attempt to evade tax. 4. We heard the learned counsel for the petitioner and the learned Special Government Pleader for Taxes. Counsel for petitioner would submit that as far as the penalty proceedings are concerned, there is no basis for imposing penalty. The building of the petitioner is housed in two floors. He points out that actually, there would be very negligible variation of about nine grams which, for the line of the business, is negligible. There was intermingling of the ornaments and the petitioner is not bound by the shop inspection report, it is submitted. As far as the St. Rev. Case is concerned, counsel for the petitioner would draw sustenance from the Judgment of a Division Bench of this Court in M/s. Yeses International Bharath Petroleum Corpn., Ernakulam v. State of Kerala (2008 (4) KHC 79). Therein, the Division Bench of this Court has held as follows: WPC.23702/03V & ST.REV.252/10 4 “Tax and penalty like tax and interest are distinct and different concepts under tax laws. What is good for levying penalty may not be good for the purpose of passing an order of assessment, re- assessment or the best judgment assessment. We hasten to add, that, the assessing authority can certainly make use of the information collected by the intelligence Officer of the department as a piece of evidence while completing regular or best judgment assessment, but at any rate, that cannot be the sole basis on which the entire assessment could be made. The assessing authority has to make independent verification of the particulars furnished by the dealer in the annual returns filed. In the course of such enquiry, if for any reason, the assessee does not co- operate with the assessing authority, he can definitely draw adverse inference against the assessee. On conclusion of the enquiry, he has to record a definite finding one way or the other. The assessment order so passed is only yet another affirmation or confirmation or endorsement of the penalty order passed by the intelligence officer, except an addition made towards the probable suppression during the assessment year WPC.23702/03V & ST.REV.252/10 5 in question. This is not what is expected of the assessing authority, even while completing the assessment proceedings by resorting to best judgment assessment. The order of assessment should definitely indicate the application of mind by the assessing authority even while completing the best judgment assessment and he is not expected to emboss his “seal of approval” to the orders made by the intelligence Officer of the department, since both these proceedings are distinct and different. In our considered view, the assessing authority has not independently applied his mind, but has merely adopted whatever that was done by the intelligence Officer of the department for the purpose of imposing penalty under Section 45A of the Act. As we have already observed that the assessing Officer is a quasi judicial authority and while exercising his quasi judicial function, he has to apply his mind independently and while doing so, can also take into consideration the findings of the intelligence Officer of the department and at any rate, that cannot be the sole basis. In this view of the matter, we cannot sustain the order passed by the assessing authority. Therefore, WPC.23702/03V & ST.REV.252/10 6 we have no other alternative, but to set aside the order passed and remand the matter to the assessing authority with a direction to pass a fresh order in accordance with law.” He would submit that the said principle is squarely applicable in this case, as what the Assessing Officer has done in the assessment proceedings is to merely re-produce the findings of the Intelligence Officer. 5. Per contra, learned Special Government Pleader would support the orders. He would further submit that this is a case where stock variation was noted. The old and the new gold ornaments were weighed. The shop inspection report was signed on behalf of the assessee and it is not open to contend that there is no stock variation. There was indeed stock variation. The method adopted by the Assessing Officer is a well accepted method in the line of the business. What is more, considerable relief has been granted to the appellant both by the first appellate authority as also the second appellate authority in the assessment proceedings. He WPC.23702/03V & ST.REV.252/10 7 also submits that even in the penalty proceedings, relief has been granted to the appellant. There can be no dispute that the Intelligence Officer has, in the order of penalty, found that there is stock variation, both in the new and old gold ornaments. Case of the petitioner would appear to be that there were new and old gold ornaments intermingled at the time of weighment. 6. As far as the Writ Petition is concerned, we are dealing in judicial review and it is not an appellate proceeding. It is a supervisory jurisdiction. The statutory authorities have dealt with the argument and, therefore, we see no ground to interfere with the penalty proceedings. We notice that at internal page six of the penalty order, it is categorically found that there was stock variation in both new and old gold ornaments resulting in the failure to maintain true and complete Accounts and the case warrants Section 47A. In such circumstances, we dismiss W.P.(C). No.23702 of 2003. 7. We have already noted that as far as the method of WPC.23702/03V & ST.REV.252/10 8 addition is concerned, considerable relief has been granted to the petitioner. The only argument raised is that there was no independent consideration by the Assessing Authority. This is a case where the Intelligence Officer has imposed penalty after a shop inspection. Variations were noted both in new and old gold ornaments. We are not in a position to accept the case of the petitioner that there was intermingling. This is a finding which was rendered in the connected Writ Petition. The following is the finding of the Assessing Officer in the Assessment Order: “The inspection has revealed unaccounted transaction as detailed above. The Officer who had inspected the business place has stated in the order that actually the weighment was done by the staff of the dealer themselves and recording was done by the Officials as well as the management staff simultaneously with a view not to have any confusion or wrong in recording the stock; and the case being so, there was not any question of intermingling of new and old gold ornaments as everybody including the Officials as well as the staff of the dealer were too WPC.23702/03V & ST.REV.252/10 9 vigilant while doing the weighing process. Moreover, the stock of new and old gold ornaments was specifically recorded as 102305.740 gms. and 85.000 gms. respectively in the SIR. Nobody had raised any complaint or objection with regard to the stock recorded while signing the SIR. If any such discrepancy had occurred while recording the SIR, the dealer would not have signed the SIR, especially when the dealer was keeping separate stock registers for both new and old gold ornaments. Further, the entire new gold ornaments exhibited in the glass gallery of the ground floor were taken and weighed; that after noting the said weight, the Officer-in-charge of the ground floor had categorically asked the staff present there whether there was anything left from being weighed either in new or old gold ornaments; and that it was then made clear by the staff present there that apart from the exhibited new gold ornaments taken from the glass gallery and weighed, nothing in the form of new or old gold ornaments left in the ground floor for weighment. Thus virtually, there was not any stock of old gold ornaments at the ground floor. The entire stock weighed and recorded from the ground WPC.23702/03V & ST.REV.252/10 10 floor was of new gold ornaments alone. Hence the contention that the details of stock of new gold ornaments and old gold ornaments were not recorded separately by the team of Officers by whom the ground floor of the business premises was inspected and that they recorded the stock details taking new gold ornaments and old gold ornaments as a single class is against actual facts and can be construed only as an afterthought to cover up the stock variations noticed. The above irregularities were confirmed by the appellate authorities also in revision. The contentions to the contrary, is therefore, not based on facts and is devoid of merits.” 8. Virtually, the findings of the Intelligence Officer are referred to and it is further referred to that the irregularities were confirmed in the Appeal and Revision. It is found that the contentions raised by the petitioner are not based on facts and it is devoid of merits. In the nature of this case and in the circumstances of this case, it may not be appropriate to hold that it falls foul of the declaration of law made by this Court in M/s. WPC.23702/03V & ST.REV.252/10 11 Yeses International Bharath Petroleum Corpn., Ernakulam v. State of Kerala (2008 (4) KHC 79). In such circumstances, we see no merit in the Revision Case also. The St. Rev. Case is dismissed. Sd/= K.M. JOSEPH, JUDGE Sd/= A. M. SHAFFIQUE, JUDGE kbk. //True Copy// 7 PS to Judge