S G JAYARAJ NADAR Vs. STATE OF MADRAS

JUDGEMENT

(1.) THIS is an appeal by the assessee from an order of the Board of Revenue by which it restored an order levying penalty on the assessee of a sum of Rs. 32, 036. The assessment related to 1961-62. The assessee, a dealer in motor cars, trucks, scooters, motor spare parts and certain other goods at Ammayanayakanur and at other branches, returned a turnover of Rs. 42, 09, 912.12. The turnover was, however, on a scrutiny of accounts, determined at Rs. 68, 06, 331.49 of which Rs. 36, 28, 976.64 was chargeable at seven per cent., Rs. 10, 237.41 at six per cent. and Rs. 3, 60, 643.73 at five per cent. During the assessment proceedings it was found that the assessee had not included in his monthly returns in Form A-2 three items of turnover : (1) a sum of Rs. 1, 95, 311.21 relating to delivery charges the assessee had paid to certain Calcutta dealers from whom he had made purchases of cars, trucks, scooters etc., (2) Rs. 2, 21, 247.97 (the figure given in the assessment order, as we are told, is a mistake) which pertained to first sales of motor parts, and (3) Rs. 1, 56, 539.25 which represented the aggregate proceeds of sales of firewood. The first two items are each chargeable at seven per cent. and at the stage of the first sale in the State and the last at two per cent. To a notice of the assessing authority proposing to bring these items to tax, the assessee filed objections, which were overruled. The assessing authority found that actually the delivery charges paid by the assessee were included in the cost price when the cars, trucks, scooters, etc., were sold by them and sales tax at seven per cent. had been collected by the assessee on the delivery charges. On the second item, the assessing authority considered that inasmuch as contrary to the rules, the assessee failed to maintain separate accounts for first sales of spare parts, and it was not possible to separate the first sales from the general entries in the account books mixing up without details the first and second sales in spare parts, it was necessary to apply best judgment and estimate the turnover of first sales of spare parts.

(2.) AS regards the last item, sales of firewood attract multi-point tax and there was no explanation from the assessee why he did not include the turnover in the return apart from saying that in the previous years he did not do so and the assessing authorities made no point of it, knowingly or unknowingly. The assessment was completed on that basis and the assessing authority, taking a lenient view of the laches on the part of the assessee, levied a penalty equal to the tax due on the chargeable turnover. There was an appeal which was substantially allowed, the penalty being reduced to Rs. 500. The Appellate ASsistant Commissioner noted that there was no dispute about the fact that the assessee failed to disclose the taxable turnovers on the three items in their monthly returns, but he felt that the failure on the part of the assessee was under the bona fide impression that it would be sufficient if correct figures were furnished at the time of the final assessment. On this view, he thought that the failure would constitute but a technical offence and a nominal penalty of Rs. 500 would meet the ends of the case. The Board of Revenue in exercise of its powers under section 34 set aside the order of the Appellate ASsistant Commissioner and, as we said, restored that of the assessing authority. In doing so, it practically adopted the reasoning of the assessing authority.Before us, it has been strenuously contended for the assessee that the assessment was not one under section 12(2) of the Act and so the levy of penalty under sub-section (3) of the section was in excess of jurisdiction. The argument is put also in a slightly different way. Mr. Srinivasan says that before the final order of assessment the assessing authority on a scrutiny of the accounts was in possession of all the facts and that the position could well be equated to a case where before the final order is made a true and correct final return is made to the officer, in which case the authority was bound to take note of it and proceed on that basis, and not on the monthly returns considered to be incorrect or incomplete. We do not think that the second line of argument in the form in which it is addressed to us can be accepted. No doubt, if actually a final return which was correct and complete was filed before the final assessment was made, it would not be open to the assessing authority to ignore it and insist on proceeding on what he considered to be incorrect and incomplete monthly returns.

(3.) THE case of the second item is, however, different, for, as we said, the assessee himself invited the Revenue to arrive at the correct turnover by best judgment and, in fact, it was arrived at on that basis. This item will literally, therefore, fall within the ambit of sub-section (2) and it would follow therefrom that ipso jure the jurisdiction to levy penalty under sub-section (3) becomes available. THE whole of the assessment as we read section 12, need not necessarily be only under sub-section (2) of that section. THE assessment may be partly under sub-section (1) and partly under sub-section (2). In any case, where part of the assessment is not based on estimate or best judgment, it is clearly not within the purview of sub-section (2) and, therefore, in respect of such part of the assessment, there will be a bar to levy penalty under sub-section (3).