State of Tamil Nadu vs N. Jugraj and Co.

P. Jyothimani, J.—The Revenue has preferred this revision against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Chennai dated October 25, 1999 made in T.A. No. 169 of 1998, in respect of assessment year 1993-94, and the same was admitted on the following substantial question of law:

Whether the order of the Tribunal deleting the penalty in entirety levied u/s 12(3)(b) notwithstanding the fact that the sales suppressed had been upheld?

It is admitted that the transactions of the assessee were reflected in the books of accounts and there was no wilful suppression. However, the assessee claimed certain exemptions and the same were denied. After denying the exemptions claimed, the penalty has been imposed.

The apex court in Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts Pvt. Ltd., while dealing with section 271(1)(c) of the income tax Act, 1961 which is similar to section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, has held as follows (page 166 in 322 ITR):

It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the assessing officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one''s income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty u/s 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the assessing officer for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature.

thereby holding that there must be a clear finding about the inaccurate particulars of income.

In the absence of a finding about the concealment of income, since on the facts of the present case it is admitted that the assessee has claimed exemption even as per the books of accounts, there is no question of levying penalty. In view of the above, we answer the question of law against the Revenue and the revision stands dismissed.