Asstt Commissioner vs M/S Paradise Investments

The instant petitions are directed against order dt 25.8.2014 passed by the Rajasthan Tax Board, Ajmer, and are against the deletion of penalty u/s 61 of the Rajasthan Value Added Tax Act, 2003 for the assessment years 2006-07 to 2009- 2010.

The brief facts noticed are that the respondent assessee had leased out air conditioner, exhaust system, generator, fire fighting equipments, electrical and other goods, bathroom fittings, lift etc. to the lessee and the assessee did not pay any tax by informing that merely because lease rental has been received, it is not exigible to tax. However, the Assessing Officer, after being remand by the higher authorities, charged tax @ 12.5%/14% as applicable and also charged interest as well as levied penalty u/s 61 of the Act. The matter was assailed before the Dy. Commissioner (Appeals), who however upheld the levy of tax on lease rental, however, insofar as penalty is concerned u/s 61, the same was deleted holding that it is a matter of classification and in a case of classification of Entries, at-least penalty u/s 61 is not leviable.

The Revenue preferred appeals before the Tax Board on the sole issue of penalty having been deleted by the DC(A), however, the assessee insofar as levy of tax is concerned, did not prefer any appeal and thus insofar as levy of tax on lease rental is concerned, it became final. The Tax Board also took into consideration the various factors and held that penalty is not leviable and accordingly rejected the appeals of Revenue.

Learned counsel for the petitioner vehemently contended that it is a clear cut case of evasion of tax and it was known to everyone that amount received on leasing out certain items is exigible to tax and knowing fully well, the assessee did not pay any tax and thus as prescribed u/s 61, penalty was rightly levied by the AO. Learned counsel contended that the officers were vigilant otherwise such cases are by & large accepted without even calling the assessees, and if wrong claim or a claim which is not allowable is made, then for only these purposes penalty can be levied. Learned counsel also contended that the assessee knowing fully well that tax is not leviable, did not file any appeal before before the Tax Board and insofar as levy of tax is concerned, it has become final and so also prayed that the penalty is required to be sustained and the issue requires consideration.

Per contra, learned counsel for the respondent contended that both the appellate authorities have found that it is a case where penalty is not leviable and admittedly it is a case of classification and two views could be possible and both the appellate authorities taking into consideration the judgment of Apex court in the case of Sree Krishna Electricals v. State of Tamil Nadu & Anr (2009) 11 SCC 687, has held that penalty is not leviable and thus supported the orders of both the appellate authorities.

I have considered the arguments advanced by the learned counsel for the parties and in my view the orders of Tax Board as well as DC(A) are just and proper and need no interference. It may be that the assessee has accepted the levy of tax, but then there has been a reasonable cause shown before the authorities below that there were two views possible as to whether on such lease rental tax is leviable or not, and merely because tax was leviable and two views are possible, in my view the finding reached by the appellate authorities are just and proper.

Admittedly the books of account were maintained properly and all the transactions are duly recorded in the books of account and the AO except levy of tax, has not found anything adverse.

Taking into consideration the judgment of Apex court in the case of Sree Krishna Electricals v. State of Tamil Nadu (supra) wherein it has been held as under :- "...So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant''s accounts books. Where certain items which are not included in the turnover are disclosed in the dealer''s own account books and the assessing authorities includes these items in the dealers'' turnover disallowing the exemption penalty cannot be imposed. The penalty levied stands set aside."

This court in the cases of CTO v. M/s. Durgeshwari Food Ltd. (2012) 32 TUD 3, and CTO v. M/s. Bambino Agro Industries Ltd. (2016) 90 VST 22 (Raj), has also held that in cases like this, penalty u/s 61 is not leviable. In my view the AO failed to justify levy of penalty, which has rightly been deleted by the appellate authorities and no question of law does arise out of the impugned order.

Accordingly, the petitions being devoid of merit, are dismissed.