K. C. DEVASSIA Vs. STATE OF KERALA

JUDGEMENT

(1.) THE petitioner in O.P. No. 2540 of 1992 is the appellant in this writ appeal. The respondent is the Revenue. In the original petition, the prayer was to quash exhibit P3 dated August 12, 1987, as affirmed in exhibit P4 dated January 27, 1988 and exhibit P6 dated November 6, 1991. Exhibit P3 is an order passed by the Additional Sales Tax Officer, Alappuzha (4th respondent) levying a penalty of Rs. 24,278 on the appellant/petitioner for the year 1984 -85. Exhibit P4 is a composite order passed, by the Deputy Commissioner of Agricultural Income -tax and Sales tax, Alappuzha (3rd respondent), in revisions and exhibit P6 is a composite order passed by the Board of Revenue (Taxes), Trivandrum (2nd respondent) for the years 1984 -85 and 1985 -86. We are concerned in this case only with the penalty levied as per exhibit P3 order for the year 1984 -85 as affirmed in exhibits P4 and P6. The penalty was levied under section 45A of the Kerala General Sales Tax Act, 1963. In the return filed by the petitioner for the year 1984 -85, the assessee reported a turnover of Rs. 77,651.27 as total and taxable. On a scrutiny of the accounts and the information received by the assessing authority, it turned out that the appellant/assessee had dealings of timber sizes and the sales consideration received on that count did not pass through the accounts. A sum of Rs. 22,000 was received from the Alleppey Coir Mats and Mattings Co -operative Society on March 30, 1985. Similarly, a sum of Rs. 2,89,117.50 was received from the Ambalapuzha Coir Mats and Mattings Co -operative Society on various dates. The above fact was intimated to the assessee. The assessing authority proceeded to impose penalty under section 45A of the Act for wilful attempt to evade payment of tax to the Government. The assessee contended that the amounts received were advances for execution of contracts and not final payments. After verification, the assessing authority found that unlike in other cases which were works contract, the above amounts received from Alleppey Coir Mats and Mattings Co -operative Society and Ambalapuzha Coir Mats and Mattings Co -operative Society were received purely for supply of goods and no element of work was involved. After considering the plea of the assessee and after making verification and in the light of the confirmation letters received from the above two co -operative societies, it was concluded that the assessee/appellant received the amounts towards the value of timber sizes for the purpose of construction of looms. The payments were not made either as advance or for contract work; but value of timber sizes for looms. In the above circumstances, it was worked out that the tax sought to be evaded was Rs. 21,244 and notice was given to the assessee to show cause as to why a penalty of Rs. 42,488 (twice the tax sought to be evaded) should not be imposed on him for his wilful attempt for evasion of tax. After considering the objections of the assessee dated July 31, 1987 and August 3, 1987, a sum of Rs. 24,278, far less than the amount proposed, was levied as penalty by the 4th respondent, by order dated August 12, 1987 (exhibit P3). In revision, the third respondent by order dated January 27, 1988 (exhibit P4), affirmed the findings and the quantum of penalty. Similarly, the second respondent by order dated November 6, 1991 (exhibit P6), affirmed the findings of the authorities below and affirmed the levy of penalty holding that there was a second set of accounts cooked up for the occasion and the levy of penalty was justified. It is the above orders (exhibits P3, P4 and P6) that were assailed in the original petition.

(2.) A learned single Judge of this Court, by judgment dated February 26, 1992, held that in the light of the confirmation letters of the two societies, it is evident that the amount received by the petitioner/assessee was the value of timber sizes for the purpose of construction of looms. It was not a payment either as advance or for contract work. The learned single Judge further held that the assessee produced a freshly prepared set of books of accounts and the Board of Revenue found that the assessee is a habitual tax evader. Even after detection of the omission by conducting inspections and investigation the petitioner did not file a revised return and in the circumstances the levy of penalty was justified. The assessee has come up in appeal against the judgment of the learned single Judge. We heard counsel for the appellant Mr. K. R. B. Kaimal. It was argued that the transactions for the years 1984 -85 and 1985 -86 were similar and from the order levying penalty for the year 1985 -86 the penalty proceedings were set aside by the third respondent - Deputy Commissioner of Agricultural Income -tax and Sales Tax, Alappuzha - in the composite order (exhibit P4). Since in similar circumstances the penalty was not found to be exigible for the year 1985 -86, the affirmation of the order levying penalty for the year 1984 -85 is per se illegal, unreasonable and unjustified. The learned single Judge was in error in declining to quash exhibits P3, P4 and P6.