The State of Tamil Nadu v. Tvl. Sri Vinayaga Agencies

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 06.08.2009CORAM:THE HONOURABLE MR. JUSTICE F.M. IBRAHIM KALIFULLAandTHE HONOURABLE MR. JUSTICE B.RAJENDRANTax Case (Revision) No.2027 of 2006The State of Tamilnadurep. by the Deputy Commissioner of Commercial Taxes,Tiruchirappalli DivisionTiruchirappalli... Petitionervs.Tvl. Sri Vinayaga Agencies25-D, Jalalkuthiri StreetTrichy... RespondentTax Case Revision filed under Section 38(1) of the Tamil NaduGeneral Sales Tax Act, 1959, against the order of the Tamil NaduSales Tax Appellate Tribunal (Additional Bench), Madurai, dated18.11.1998 in M.T.A.No.245 of 1997 and MTMP.No.171 of 1997 againstAppeal NO.610/94 dated 2.4.97 on the file of the Appellate AssistantCommissioner (CT) Trichy-1 against TNGST No.347130/94-95 dated28.8.96 on the file of the Commercial Tax Officer, Mailamchandai-ICircle, Trichy. For Petitioner: Mr.Haja Naziruddin Spl. Govt. Pleader for Taxes ----- O R D E R(Made by B.RAJENDRAN,J.)The State Government has come forward with this revision asagainst the order passed by the Sales Tax Appellate Tribunal, dated18.11.1998. 2. The assessee, who is a dealer in G.I. Pipes had submitted itsreturn for the assessment year 1994-95. There was a dispute inregard to the stock variation of Rs.3,72,162/-, which was noticed atthe time of inspection by the authorities on 21.01.1995 and the https://hcservices.ecourts.gov.in/hcservices/ corresponding levy of tax, surcharge and additional sales tax were indispute. The assessee also disputed the levy of penalty ofRs.1,06,517/- under Section 12(3) of the Act, which was levied by theAssessing Officer. Aggrieved against the order levying penalty andadditional sales tax, the respondent-assessee preferred an appealbefore the Appellate Assistant Commissioner in Appeal No.610/94. TheAppellate Authority by an order dated 02.04.1997 has deleted theequal addition made on turnover to the tune of Rs.3,59,251/- andultimately, the taxable turnover of the assessee was refixed atRs.20,80,442/- and the consequently, the penalty under Section 12(3)(b) of the Act was refixed at Rs.17,864/- levying separately undereach Act. The assessee against the order of the Appellate AssistantCommissioner preferred an appeal before the Tribunal in AP.No.245 of1997 and the Revenue also filed an enhancement petition in TMP.No.171of 1997, which were taken up jointly and a common order was passed bythe Tribunal on 18.11.1998. The Tribunal, after elaboratelyconsidering the details, came to the conclusion that no furtheraddition is required for the stock variation arrived at by thetrading account method and following the decision of this Courtreported in 103 STC 543, they concluded that no further addition isrequired in this case and accordingly, set aside and deleted theaddition of equal amount of Rs.1,86,081/- and allowed that portion ofthe appeal and as far as the enhancement petition is concerned, theyrejected the claim for the restoration of turnover of Rs.7,18,502/-in the enhancement petition and the consequential levy of tax,surcharge, additional sales tax and penalty and in the result, theappeal was modified and the enhancement petition was dismissed.Aggrieved against the modification and the deletion of the equaladdition amount, the Revenue has filed the above revision.3. We have heard the learned counsel appearing on either sideand perused the materials available on record.4. The questions of law that were raised by the petitioner, areas follows:"i. Whether in the facts and circumstances, theTribunal is legally correct in deleting the equal timeaddition of turnover even while having sustained theturnover of actual suppression?ii. Whether in the facts and circumstances, theTribunal is right in deleting the consequential penaltylevied under Section 12(3)(b) of the TNGST Act?"5. We have carefully verified the order of the AssessingAuthority in regard to the equal addition made by the AssessingAuthority. The Assessing Authority in his order had stated thatnotice was given to the assessee calling for objections and only https://hcservices.ecourts.gov.in/hcservices/ after considering the objections, the order was passed.Unfortunately, we are unable to see even one line or any finding forinclusion of addition of equal amount for the alleged omission. Inthe Assessing Authority's order, after the alleged conclusion, it hasbeen stated as follows:Taxable turnover proposed to be determined.------------------------------------------------------------------------ 3% hand 8% G.P. 12% Elec- 4% G.I. Total Pump & Fittings. Trical Pipes spares. Goods. ------------------------------------------------------------------------Sales turnover 72852 813383 16257 805788 170828as per accountsAdd: Salessuppressionsadopting the 36243 323008 -- -- 359251Add: Equalamount foromissions 36243 323008 -- -- 359251 ------------------------------------------------------ 72486 646016 -- -- 718502-----------------------------------------------------------------------6. In the assessment order, a mere addition was made in the lastcolumn making an equal addition without giving any reasoning at all.In fact, the Assessing Authority is a quasi judicial authority, whohas to give reasons for his finding. Neither any analysis nor anyevaluation was made, but straight-away, this equal addition was madewithout giving any reason at all. Contrary, the assessee had givenample documents, made objections, but nothing was considered or noopportunity was given to him to put forth his explanation in regardto the equal addition at any point of time. 7. Even the Appellate Assistant Commissioner has not given anyfinding in regard to the equal addition and the relevant prtion ofthe order is extracted as under:"In this case, the inspecting officials though notderived variation based on physical verification, they haveobtained such difference by means of trading account method,wherein the particulars are verified with reference to thecorrect figures taken out from the accounts of theappellants. The figures adopted in such workings were notat all incorrect as argued by the appellant in this case. https://hcservices.ecourts.gov.in/hcservices/ Therefore, stock difference arrived in this case could notbe treated as incorrect one. Therefore, assessment made onstock difference noticed in the place of business and itsequal addition is sustained.8. The order of the Appellate Assistant Commissioner is also anorder without applying principles of natural justice, as no reasonwas given for his findings. The authorities, who are all quasijudicial authorities, should exercise their function in the mannerknown to law. Having given a clear finding both on facts and on law,he has to give reasons to sustain such equal addition, especiallywhen the Assessing Officer had not at all given any reason and simplyhad adopted equal addition system without any basis. Aggrievedagainst the order of the Appellate Assistant Commissioner, theassessee filed an appeal before the Tribunal. The Tribunal has goneinto detail in so far as this point of stock variation is concernedand has come to a clear conclusion, which reads as follows:"11. Coming to the addition of equal amount forprobable omission, the argument of the appellants that thereis no subsequent inspection during 1994-95 and there is nocontinuous pattern of suppression or similar pattern ofsuppression involved in arriving the stock variation noticedat the time of inspection is well founded because of thefact that the stock variation was only arrived after takinginto consideration of the opening stock as on 01.04.1994,purchases and sales upto the date of inspection, which isthe cumulative effect of alleged suppression right from theperiod from 01.04.1994 to till the time of inspection.Moreover, the stock variation was arrived only on the basisof money value of the goods and not on the quantitativebasis. Under the above circumstances, we feel that nofurther addition is required for the stock variation arrivedby the trading account method. It is rightly held by theHon'ble Madras High Court in the case of T.Singaravelureported in 103 STC 543 that in the absence of anycontinuous pattern of suppression or similar pattern ofsuppression or in the absence of any brought forwardentries, the further addition for the estimated suppressionfor probable omission cannot be made. Hence, following theprinciples held by the Hon'ble Madras High Court in the casereferred supra, we are of the view that no further additionis required in this case with reference to the circumstancesstand above. Accordingly, we set aside and delete theaddition of equal amount of Rs.1,86,081/- and allow thisportion of the appeal." 9. The Tribunal has, therefore, rightly applied its mind,verified the contents, compared the details and finally given a https://hcservices.ecourts.gov.in/hcservices/ finding that the stock verification was arrived at only on the basisof money value of the goods and not on the quantitative basis, whichhas not at all been taken into consideration either by the AssessingOfficer or the first appellate authority in deciding or in coming tothe conclusion in so far as the stock variation is concerned. 10. We see no reason to interfere with the findings of theTribunal and accordingly, the questions of law are answered againstthe Revenue and in favour of the assessee. The revision fails andthe same is accordingly dismissed. No costs. Sd/- Asst.Registrar/true copy/ Sub Asst.Registrar ATR To1. Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai.2. The Appellate Assistant Commissioner (CT) Trichy.3. The Commercial Tax Officer Mailamchandai-I Circle Tiruchirappalli.1 cc To The Government Pleader, SR.36821 T.C.(R) No.2027 of 2006RL {CO}TP/20.8.2009.