KANJINGHAT BROTHERS. Vs. STATE OF KERALA

JUDGEMENT

(1.) THE challenge is to the proceedings Ext.P -1 of the Intelligence Officer,Agricultural Income Tax and Sales Tax,Ernakulam,confirmed in revision by the Deputy commissioner by the proceedings Ext.P -2 and by the Board of Revenue by the proceedings Ext.P -3.By the said proceedings the permission accorded to the petitioner to compound depart mentally the offences of violation of S.27 of the Kerala General Sales Tax Act,1963(the Act)for a sum of Rs.25,451 stands accepted and confirmed.The facts leading to the case are as follows.

(2.) THE petitioner is a firm of glass merchants ia Broadway,Ernakulam.There was an inspection of the shop on 19th May 1988 when it is stated that unaccounted purchases of demand drafts made by the petitioner from the Lord Krishna Bank,Ernakulam were discovered.According to the Intelligence Officer these drafts aggregate Rs.2,12,170.74 during the year 1986 -87 and were in favour of Sreekala Glass works,Madras and Sree Vallabha Glass works,Madras from whom the petitioner was purchasing glasswares.The purchase of these drafts had not been entered in the account books of the petitioner.The matter was posted for hearing on 23rd May 1988 when the petitioner's partner by name Dinesh accepted the purchase of these drafts which were sent to the outside parties against purchases.He admitted that the verification of the accounts revealed that the petitioner had not accounted these demand draft;in the books of accounts and thereby the petitioner failed to maintain true and complete accounts of its business transactions for the year,which is an offence punishable under the Act.He therefore requested that the offence may be compounded depart mentally in lieu of prosecution.This request for compounding appears at page 115 of the file produced before me.The Intelligence officer allowed the request fixing the compounding fee at Rs.25,461.The basis of this figure of Rs.25,461 is stated in the order which he passed subsequently on 29th February 1989(Ext.in which he mentioned that the non -accounting of the demand drafts leads to the "fact "that the dealer had not accounted his inter state purchases to the tune of Rs.2,12,170 -74 ).This in turn leads to non -accounting of the sales pertaining to the purchases.Thus the petitioner has failed to maintain true and complete accounts of its business transactions and thereby contravened the provisions of S.27 of the Act.Rs.25,461 is the tax effect on the suppressed purchase turnover,chat is the value of the unaccounted demand drafts.Rs.25,461 was therefore fixed as the compounding fee which had been paid by the petitioner on 23rd May 1988.

(3.) AT this juncture it is necessary to remember that according to the petitioner the demand drafts were purchased for payment to certain dealers;in Madras,with funds obtained from the partners.The firm itself had no funds in those days and therefore appropriate entries were made in the accounts relating to these amounts as and when funds became available.There is no case of any suppression of turnover at all and consequently no question of evasion of tax.The case was only one of non -maintenance of accounts truly as and when the transactions occurred and therefore the case fell only under S.47(1 )(b)with a maximum compounding fee of Rs.5,000.