IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 20.12.2011 CORAM; THE HONOURABLE MR.JUSTICE P.JYOTHIMANI and THE HONOURABLE MRS.JUSTICE S.VIMALA Tax Case (Revision) NO.1591 OF 2006 and TCMP No.1690 of 2006 Plastic Processors No.346, Wall Tax Road Chennai 79 ..Petitioner vs The State of Tamil Nadu, Rep.by C.T.O., Peddunaickenpet, Asst.circle, Chennai 108 ..Respondent Revision Petition is filed against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench) Chennai, dated 6.7.2001 and passed in S.T.A.No.556/2000 preferred against the order of the Appellate Assistant Commissioner dated 18/11/99 and passed in TNGST 047973/93-94. for Petitioner :Mr.A.Thiagarajan Senior Counsel for Mr.S.Ramesh Kumar for respondent :Mr.S.Kanmani Annamalai Government Advocate (Tax) ORDER (Order of the Court was made by P.JYOTHIMANI,J.) The present revision has been filed by the assessee against the impugned order of the Tribunal by which the Tribunal, while confirming the orders of the assessing authority as well as the Appellate Assistant Commissioner imposing penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act 1959, has held that the assessee is liable for penalty to the minimum levy of 50%. It is against the said impugned order of the Tribunal, the assessee has filed the present revision which was admitted on the following questions of law https://hcservices.ecourts.gov.in/hcservices/ "1.Whether on the facts and in the circumstances of the case, the Tribunal was right in levying penalty on the petitioner even after holding that the petitioner has reported the turnover and claimed exemption is correct in law ? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in levying penalty on the ground "but for the investigation this suppression would not have come to light" is correct in law ? " relating to the assessment year 1993-94. 2. The issue is as to whether the levy of penalty is admissible or not. On the facts of the case, as it is found by the assessing authority in his order, it is clear that the assessee while filing the original returns has claimed exemption in respect of certain High Sea Sales and the same was disallowed, by holding the turnover at Rs.8,60,000/- and inflicted the penalty of Rs.29,232/- under Section 16(2) of the Act. It was against the said order of the assessing authority, the assessee filed an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner has confirmed the order of the assessing authority, against which the assessee has filed further appeal before the Tribunal and the Tribunal in the impugned order while confirming the orders of both the authorities, however, has reduced the penalty to minimum 50% by holding that there is willful non-disclosure under Section 16(2) by the assessee. 3. The law is well settled that when once the sale is shown in the bill of lading and claimed exemption that will not amount to wilful non-disclosure by the assessee. On a reading of the assessment order it is seen that it is not even the case of the assessing authority that there is wilful non-disclosure under Section 16(2) of the TNGST Act, 1959 which reads as follows: 3. "Sec.16(2) In making an assessment under clause (a) of sub- section (1), the assessing authority may, if it is satisfied that the escape from the assessment is due to wilful non- disclosure of assessable turnover by the dealer, direct the dealer, to pay, in addition to the tax assessed under clause (a) of sub-section (1), by way of penalty a sum which shall be- (a) fifty per cent of the tax due on the turnover that was willfully not disclosed if the tax due on such turnover is not more than ten per cent of the tax paid as per the return; (b)one hundred per cent of the tax due on the turnover that was wilfully not disclosed if the tax due on such turnover is more than ten per cent but not more than fifty per cent of the tax paid as per the return; https://hcservices.ecourts.gov.in/hcservices/ (c)one hundred and fifty per cent of the tax due on the assessable turnover that was wilfully not disclosed, if the tax due on such turnover is more than fifty per cent of the tax paid as per the return; (d)one hundred and fifty per cent of the tax due on the assessable turnover that was wilfully not disclosed, in the case of self-assessment referred to in sub-section (1) of section 12: Provided that no penalty under this sub-section shall be imposed unless the dealer affected has had a reasonable opportunity of showing cause against such imposition." A reading of this would show that the act is quasi-criminal in nature and there must be wilful non-disclosure on the part of the assessee for the purpose of imposing the penalty. It was in COMMISSIONER OF INCOME-TAX V. RELIANCE PETROPRODUCTS PVT.LTD., ((2010) Vol.322 ITR 158 SC) while dealing with the relevant provisions under the Income Tax Act for imposing penalty, the Supreme Court has held that there must a deliberate falsehood on the part of the assessee for the purpose of imposing penalty. Para 12 of the said order is extracted hereunder: "12. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i)an item of receipt may be suppressed fraudulently; (ii)an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income and therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271 https://hcservices.ecourts.gov.in/hcservices/ (1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." This has been the consistent view of this Court in DEPUTY COMMISSIONER OF COMMERCIAL TAXES, TRICHY DIVISION, TRICHY V. V.R.KUPPUSAMY GOUNDER AND SONS (1995 Vol.98 STC page 408). While referring to Section 16(2) of the TNGST Act the Division Bench has held that when a claim of exemption was made even if it was denied by the authority, it should be treated as bona fide and cannot be held to be a suppression and para 14 of the said judgment is as follows: "14.The assessing authority also levied penalty under section 16(2) of the TNGST Act, 1959. According to the assessees the claim of exemption was made bona fide and the same was also accepted in the original assessments. The assessments were revised on a mere change of opinion. Therefore, the penalty under section 16(2) of the Act would not be attracted. According to the Revenue, the original penalty orders of the assessing officer should be restored. The assessees have filed counters for enhancement petitions filed by the department. According to the assessees the Appellate Assistant Commissioner ought to have deleted the entire penalty instead of sustaining 50 per cent of the penalty levied by the assessing authority. It remains to be seen that the exemption claimed by the assessees was allowed in the original assessment. The non- disclosure of turnover on the apart of the assessees came into existence because of the revised assessments made by the assessing officer. Simply because the assessees' claim for exemption was negatived by the department, that does not mean that the assessees have suppressed anything. Under these circumstances, the Tribunal was correct in holding that no penalty is exigible in the case of all the assessees under section 16(2) of the Act." In view of the abovesaid facts and the consistent views by the Courts, we have no hesitation to answer the questions of law Nos.1 and 2 in favour of the assessee and against the Revenue. 4. Accordingly, the Revision is allowed. Connected pending T.C.M.P.1690/2006 is disposed of. No costs. Sd/- Assistant Registrar /TRUE COPY/ Sub Assistant Registrar sal https://hcservices.ecourts.gov.in/hcservices/ To 1. The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench) Chennai. 2. The Appellate Assistant Commissioner (CT) I Kuralagam (Annexe) VI Floor, Chennai-600 108. +1CC to M/s.S.Ramesh Kumar, Advocate SR.77992 +1CC to Special Government Pleader Taxes SR.78134 Tax case (Revision) No.1591 of 2006 & TCMP No.1690 of 2006 VSN(CO) KSA(23/01/2012) https://hcservices.ecourts.gov.in/hcservices/