By TIOL News Service

MUMBAI, MAR 04, 2015: THE issue before the Bench is - Whether the basic burden about concealment of the transactions or inaccurate furnishing of particulars of the transaction is on the Revenue. YES is the answer.

Facts of the case

The assessee, a dealer under the Bombay Sales Tax Act, 1959 as well as the Central Sales Tax Act, 1956, was a manufacturer of textile machinery and its spare parts, iron and steel hammers, M.S.Flats etc.. The assessee Company had been referred to Board for Industrial and Financial Reconstruction (BIFR) and came to be declared sick w.e.f. 28.6.1991 and various financial concessions were given to the assessee by the Board. The Company had been granted installments.

The assessee filed returns for financial years 1982-83 and 1989-90 under Bombay Act as well as Central Act. The Assessing Authority assessed the assessee Company for tax u/s 33(3) of the Bombay Act as well as u/s 9(2) of the Central Act read with Section 33(3) of the Bombay Act for both the financial years. For the year 1982-83 the assessing authority levied penalty u/s 36(3) of the Bombay Act at Rs.1,16,715/- and penalty u/s 36(2)(c) Explanation-I of the Bombay Act at Rs.5,00,000/- under the Bombay Act. Under the Central Act by a separate order passed u/s 9(2) of the Central Act read with section 36(2)(c) Explanation I of the Bombay Act, the penalty was levied at Rs.4,00,000/- and penalty u/s 36(3) of the Bombay Act was levied at Rs.1,61,162/. For 1989-90 the AO levied a penalty u/s 36(3) (a) of the Bombay Act at Rs.5,92,000/- and u/s 36 (3) (b) of the Bombay Act at Rs.5,15,000/-. Pursuant to Section 36(2) (c) Explanation-I of the Bombay Act, a penalty of Rs.1,20,000/- was also levied under a separate order. Under the Central Act interest u/s 36(3)(a) of the Bombay Act read with Section 9(2A) of Central Act was levied at Rs.14,80,000/- as also u/s 36(3)(b) of Bombay Act Rs.3,96,115/. By a separate order penalty u/s 36(2)(c) Explanation-I of Bombay Act read with Section 9(2A) of Central Act was levied at Rs.2,00,000/-.

The assessee being aggrieved by aforesaid orders had been before the first appellate Authority. The Appellate Authority granted some relief in penalty and interest for 198283, however, did not grant relief in penalty and interest for the period 1989-90 as the appellant had failed to attend, and upheld the orders passed by the AO. The Tribunal granted some remission in the interest. As far as penalty is concerned, the Tribunal held that the assessee had filed the returns late but as the assessee having complied with production of books of accounts and no discrepancy has been found and book results have been accepted, the penalty u/s 36(2)(c) read with Explanation I of the Bombay Act was deleted referring to the decision of the High Court in the case of M/s. Indoswe Engineers Pvt. Ltd. (101 STC 177).

On appeal by the Revenue, the High Court held that,

++ the Tribunal appears to have considered that presumptions as occurring under the explanation I are rebuttable ones and further that onus of rebuttal appears to have been discharged by the record. The Tribunal has also taken stock of the amendment to Section 36(2)(c) and explanations under it;

++ It would be appropriate to consider the case referred to by the Tribunal viz. Indoswe Engineers (P) Ltd. Vs. State of Maharashtra reported in 1996 (Vol.101) 177. It was held that the basic burden about concealment of the transactions or inaccurate furnishing of particulars of the transaction is on the Revenue and in case in the assessment it is found that the tax paid by the assessee is less than 80% of the tax assessed, the presumption with regard to failure to disclose such transaction of sale or purchase would arise;

++ In the present case indisputably the books of accounts had been submitted have been accepted and not objected to at all. There is no evidence on record to show that the assessee in fact had failed to disclose any transaction of sale and purchase neither it was pointed out before the first Appellate Authority or for that matter before the second Appellate Authority;

++ The questions have to be answered taking into account effect of the provision on the facts of the matter. The Tribunal has assessed the situation on the basis of record and evidence as had been placed before it and while the Tribunal dismissed the matter, it did not purport to shift the burden on the revenue to establish aforesaid;

++ What emerges is that the books of accounts had been submitted had not been objected to and were accepted. It further comes on record that there was debit balance in the Companies account as on 31.12.1990 to the tune of Rs.427.22 Lakhs showing that the company had been not faring well financially and had been incurring heavy losses resulting in erosion of capital. Thus it appears that the lesser payment of taxes is not attributable to a neglect by the company or for that matter a willful one at that;

++ Thus, the observations appearing in the judgment of the Tribunal can hardly be said to hold that the onus lies on the Revenue to establish in the facts and circumstances of the present case wherein the books of accounts which have been submitted have been accepted and not objected to and further that the assessee had been facing the financial difficulties and was considered to be a sick industry. In such an indisputable position the question as has been framed as a matter of fact appears to have been erroneously framed as it does not appear to be the purport of the Tribunal's judgment to hold that the onus in the circumstances of the case lies on revenue and the narration was with respect to the circumstances. The second question has to be answered in the affirmative for it emerges that the Indoswe judgment by the Division Bench of this Court gives an exposition on the scheme with regard to imposition of penalty u/s 36(2)(c) with reference to the explanations (I) and (II). On perusal of judgment and the facts and circumstances of the case involved in Indoswe case, it cannot be said that it dealt with only explanation-II as has been sought to be urged on behalf of the Revenue. In the circumstances, the reference stands answered accordingly;

++ having regard to the aforesaid discussion and for the reasons as are given hereinabove, Tribunal is justified in deleting the penalty imposed on assessee u/s 36(2)(c) read with explanation-I of the Bombay Sales Tax Act, 1959.

(See 2015-TIOL-537-HC-MUM-VAT)