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IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL HON’BLE THE CHIEF JUSTICE MS. RITU BAHRI AND HON’BLE SRI JUSTICE RAKESH THAPLIYAL COMMERCIAL TAX REVISION NO. 92 OF 2017 15TH APRIL, 2024 Commissioner, Commercial Tax
…..Revisionist. Versus M/s Lakshit Fashion Pvt. Ltd.
….Respondent. With COMMERCIAL TAX REVISION NO. 91 OF 2017 Commissioner, Commercial Tax
…..Revisionist. Versus M/s Lakshit Fashion Pvt. Ltd.
….Respondent. With COMMERCIAL TAX REVISION NO. 93 OF 2017 Commissioner, Commercial Tax
…..Revisionist. Versus M/s Lakshit Fashion Pvt. Ltd.
….Respondent. Counsel for the Revisionist : Ms. Puja Banga, learned Brief
Holder. Counsel for the Respondent : Mr. P.R. Mullick, learned counsel. The Court made the following: COMMON JUDGMENT:(per Hon’ble The Chief Justice Ms. Ritu Bahri)
The revisionist- Commercial Tax, Uttarakhand has come up in revision against the order dated 26.03.2016 (Annexure-5), passed by the Commercial Tax Tribunal, Uttarakhand, Dehradun.
Brief facts in all the three cases are that the respondent- M/s Lakshit Fashion Pvt. Ltd. had to file his quarterly returns for the assessment year 2014-15. These
returns had to be filed by 31.07.2014, 31.10.2014 and 30.01.2015. However, the same were fled after the delay of 28 days, 27 days and 25 days.
Vide order dated 25.04.2015, the Assessing Authority passed penalty orders taking a view that the assessee has knowingly violated the provisions of Section 58(1)(iv) by filing the returns of the relevant three quarters late. The Assessing Authority imposed the maximum penalty (50% of the amounts of admitted tax payable) for the relevant first, second and third quarters to the tune of Rs.1,29,686/-, Rs.1,20,984/- and Rs.1,18,816/- respectively.
The Assessee filed first appeals on 25.04.2015, and vide order dated 29.12.2015, the appeals were allowed by the Joint Commissioner (Appeal)-I, Commercial Tax, Uttarakhand Head Quarter, Dehradun, and he reduced the penalty from 50% to 25%, i.e. to the tune of Rs.64,584/-, Rs.60,492/- and Rs.59,408/- for the relevant three quarters.
Against the order dated 29.12.2015, both, the assessee and the Commercial Tax Department have preferred the second appeals before the Commercial Tax Tribunal, Uttarakhand.
The Tribunal proceeded to decide these appeals by examining the penalty proceedings under Section 58(1)(iv). Relevant portion of Section 58 is as under:-
“Section 58: Offence and Penalties:- (1) If the assessing authority is satisfied that any dealer or other person has committed the offence in any clause of column (1) of the following chart it may, after such enquiry as deemed necessary, such dealer or person shall pay, by way of penalty, in addition to the tax, if any, payable by mentioned in the related column (2), namely- Column-1 Offences Column-2 Penalty *
* *
* (iv) has, without reasonable cause failed to furnish the return of his turnover or to furnish it within the time allowed and in the manner prescribed; (iv) a sum not less than ten percent, but not exceeding twenty five percent of the tax due if the tax due is up to ten thousand rupees and fifty percent if the tax due is above ten thousand rupees: *
* *
The Tribunal examined the facts that for the first quarter, i.e. for the months of April, May and June, 2014, the tax was deposited late by 08 days, 04 days and 30 days respectively.
(i) For the second quarter, i.e. for the months of July, August, 2014, the tax was deposited with a delay 01 day and 06 days, and the tax for the month of September, 2014 was deposited within time. (ii) With respect to the third quarter, i.e. for the months of October, November and December, 2014, the assessee had deposited the admitted tax for the months of October and December within time, and the admitted tax for the month of November, 2014 was deposited with a delay of 02 days.
The Tribunal held that that on account of the delay, the Assessing Authority was correct in initiating the penalty proceedings under Section 58(1)(iv).
With respect to the quantum, the Tribunal while examining the imposition of penalty, held that out of the nine relevant months of the relevant quarters, the due admitted tax of the three months has already been deposited by the assessee within time prescribed, and with respect to the remaining months, the returns were filed in the same financial year and the amount of interest has already been deposited by the assessee. The penalty was reduced to 15% of the admitted tax payable by the assessee, and the appeals of the assessee were partly allowed. The penalty for the first quarter for the assessment year 2014-15 was determined at Rs.38,751/-; for the second quarter Rs.36,295/-, and; for the third quarter Rs.35,645/-.
At this stage, counsel for the respondent has referred to the judgment of the Hon’ble Supreme Court in Commissioner of Income Tax (Addl.), Gujarat vs. M/s I.M. Patel & Co., 1993 Supp (1) SCC 621, which was dealing with the question of imposition of penalty on belated filing of returns.
The abovesaid judgment will not be applicable to the facts of the present case, as in that case, the Supreme Court was examining the issue that in case returns are not filed within time, whether these Revenue Authorities are
required to establish mens rea with the assessee that he deposited the returns late.
In the case before the Supreme Court, for the year 1964-65, the assessee returned an income of Rs.48,000/-, while he was assessed on an income of Rs.58,557/-, and penalty of Rs.9,690/- was imposed. Similarly, for the year 1965-66, the assessee returned an income of Rs.45,000/- and he was assessed on an income of Rs.52,337/-, and penalty of Rs.6,115/- was imposed upon the assessee. For the year 1966-67, the assessee returned an income of Rs.51,000/-, and he was assessed on an income of Rs.62,560/- and a penalty of Rs.3,915/- was imposed. In this backdrop, the imposition of penalty was held to be correct. The imposition of penalty was upheld by the Appellate Assistant Commissioner. However, the Tribunal decided the appeal in favour of the assessee. In this backdrop, the Hon’ble Supreme Court allowed the appeal of the Revenue, and set-aside the judgment of the Tribunal and held that the Assessing Authority and the Appellate Authority were correct in imposing the penalty.
In that case before the Supreme Court, the returns were filed by the assessee. However, the Assessing Authority found that the income declared by the assessee, as above, is less than the income assessed by the Assessing Authority, and in this backdrop, the penalty was imposed. He had filed
incorrect returns for the three assessment years, and the income was much more.
In the present case, the Revenue Department is not disputing the fact that the tax was deposited along with interest. The only question for consideration in these revisions is that whether the income declared by the assessee was on the lower side in filing the returns, and whether penalty of 10% is sufficient as per the above said Act.
In the present case, it is not the case of the Revenue that the income declared by the Assessee was on the lower side. The Revenue has accepted the income tax returns as it is. However, on the question of delay, whether the penalty should be 50% or 25% or 15%, is the only question for consideration in these revisions.
The Tribunal, thereafter, proceeded to examine the judgments of the Hon’ble Supreme Court in M/s Hindustan Steel vs. State of Orissa; Deputy Commissioner, Central School Organization & another vs. J. Hussain, (2013) 10 SCC 106, as well as the judgments of the Allahabad High Court in M/s Dhampur East Company vs. Commissioner of Commercial Tax, U.P., 2004 NTN (Vol.24) 434; M/s Jain Sons vs. Commissioner of Commercial Tax, 2000 NTN (Vol. 16), Page 139.
Relevant portion of Section 58 of the Act is as under:- “Section 58. Offences and Penalties.
(1) If the assessing authority is satisfied that any dealer or other person has committed the offence in any clause of column (1) of the following chart, it may, after such enquiry as deemed necessary, direct that such dealer or person shall pay, by way of penalty, in addition to the tax, if any, payable by mentioned in the related column (2), namely- Column-1 Offences Column-2 Penalties * * * *
(vii) has, without any reasonable cause failed-
(a) * * * * * * * * * * * *
(b) to pay within the time allowed the tax due under the provisions of the Act; * * * *
(b) a sum not less than ten percent, but not exceeding twenty five percent of the amount due if the amount due is up to ten thousand rupees and fifty percent if the amount due is above ten thousand rupees. * * * *
In the abovesaid judgments, the Hon’ble Supreme Court and the Allahabad High Court have examined the provisions of imposition of penalty for late deposit of tax with interest, and have held that if penalty is to be imposed it is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. The power should be exercised in reasonable manner and penalty should not be imposed in each and every case when there is a default. Imposition of penalty, mechanically, is highly improper and cannot be approved. When punishment is found
to be outrageously disproportionate to the nature of charge, then principle of proportionality comes into play. The question of the choice and quantum of punishment is within the jurisdiction and discretion of the court martial, and finally, if dealer deposits the tax payable with interest prior to initiation of penalty proceedings, then lenient view should be adopted which assessing the quantum of penalty.
In the present case, the Assessing Authority has imposed 50% penalty on the amount of admitted tax, which the Appellate Authority has reduced to 25%, and the Tribunal reduced it to 15% from 25%. The order of the Tribunal has been passed after applying the ratio of the abovesaid judgments of the Hon’ble Supreme Court and the Allahabad High Court, and keeping in view that the tax had been deposited with interest.
Since the Tribunal in CTR Nos.92/17, 91/17 and 93/17 has rightly followed the opinion of the Hon’ble Supreme Court as well as other High Courts that power to levy penalty is a discretionary power, and penalty should not be imposed in each and every cases where there is a default, and imposition of penalty, mechanically, is highly improper and cannot be approved.
Recently, the Allahabad High Court in Commissioner, Commercial Tax vs. Bhushan Power and
Steel Ltd., (2016) 60 NTN DX 21, dismissed the revision filed by the Revenue against the order of the Tribunal dated 26.08.2015, whereby the Tribunal had set-aside the penalty imposed on the assessee by observing that the assessee had deposited the admitted tax late along with the interest. Reference was also made to another judgment of the Allahabad High Court in M/s Govind Sugar Mills Ltd. vs. CTT, 2008 UPTC Page 991, wherein it has been held that where the admitted tax is paid along with interest, it would not be justified to impose any penalty.
In the facts of the present case, the penalty has been reduced from 25% to 15%, and all the admitted returns had been accepted as it is.
In view of the above, no question of law arises in the present revisions.
We find no merit in these revisions and the same are, accordingly, dismissed.
Pending application, if any, also stands disposed of.
(RITU BAHRI, C.J.)
(RAKESH THAPLIYAL, J.) Dated: 15th April, 2024 NISHANT