Chandrashekhar, J. - The Additional Judge (Revision) has referred the following question of law for the opinion of this court :
'1. Whether the Additional Revising Authority, Aligarh Range was justified in his finding that in order to determine the quantum of penalty under clause (b) of S. 15-A(1) the assessing authority should not take into consideration the turnover finally fixed by him, and only that turnover should be taken into consideration which has been concealed in the account books ?'
2. If the answer to the above question is in the negative then whether the revising authority was justified in reducing the amount of penalty to Rs. 150/- only
2. The material facts, as set out in the statement of the case, briefly these : The assessee firm carried on business in foodgrains, oilseeds, and allied commodities. In the year 1968-69 it returned its gross and taxable turnovers as about Rs. 18,45,000/- and Rs. 1,017/-respectively. A survey made on the 31st January, 1969, revealed that the assessee had assessee had concealed a part of its turnover. Thereafter the assessing authority determined the taxable turnover for that year as Rs. 50,000/-. The assessee filed an appeal in which the taxable turnover was reduced to Rs. 40,000/- by the appellate authority. Proceedings under S.15-A(1)(b) of the U.P. Sales Tax Act (shortly called the Act) were initiated on the ground that the assessee had concealed the particulars of its turnover. To a notice sent by the assessing authority, the assessee submitted a written reply which was not accepted by the assessing authority who levied a penalty of Rs. 650. The assessees appeal against the levy of penalty, was dismissed. It filed a revision which was partly allowed. Though the judge (Revision) held that the Sales Tax Officer had rightly imposed a penalty on the assessee, he (the Judge) reduced the amount of penalty to Rs. 150/- observings as follows :-
'in my opinion the authorities below wrongly fixed the amount of penalty after taking into consideration the assessed taxable turnover. In fact in fixing the penalty, only that turnover should be taken into consideration which the dealer had tried to conceal
3. Sub-S. (1) of S. 15-A of the Act reads :
'15-A : PENALTY FOR FAILURE TO FILE RETURNS -
(1) If the Assessing Authority is satisfied that any dealer :-
(a) has without reasonable cause failed to furnish the return of his turnover which he was required to furnish under Ss. 7, 7-A or 18 or has without reasonable cause, failed to furnish it within the time allowed and in the manner prescribed; or
(b) has concealed the particulars of his turnover or deliberately furnished inaccurate particulars of such turnover; or
(c) has without reasonable cause, failed to pay, within the time allowed the tax assessed on him.;
he may direct that such dealer shall pay, by way of penalty, in the cases referred to in clauses (a) and (c) in addition to the amount of tax payable by him, a sum not exceeding 25 per cent of the tax due if the tax in upto Rs. 10,000 and not exceeding 500%o of tax due if the tax is above Rs. 10,000 and in the cases referred to in cl. (b), in addition to any tax payable by him, a sum not exceeding one and half times the amount of tax, which would have been avoided, if the turnover, as returned by such dealer, had been accepted the correct turnover'.
The present case comes within the ambit of clause (b) of the above sub-Section in as much as the assessee had concealed the particulars of its turnover. The maximum penalty prescribed for a case coming under that clause, is one and a half times the amount of tax which would have been avoided if the turnover, as returned by the assessee, had been accepted as the correct turnover.
4. The learned Standing Counsel appearing for the Revenue contended that once it is found that an assessee had concealed any part of his turnover, the amount of penalty leviable on him under clause (b) of S. 15-A(1) is correlated to the tax payable not on the turnover concealed, but on the difference between the assessed turnover and the turnover returned.
The contention of the learned Standing Counsel receives support from the decision of a bench of Andhra Pradesh High Court in Batti Fakruddin Sahab & Sons vs. State of Andhra Pradesh in which the penalty provision in the Andhra Pradesh General Sales Tax Act, which is in pari materia with S. 15-A of the U.P. Sales Tax Act, came up for interpretation. Their Lordships based their decision on the following observations of the same High Court in Kalidindi Subbaraju Gopalaraju vs. Commissioner of Income Tax while construing S. 28 of the Income Tax Act, 1922 which is analogous to the penalty provision in the Andhra Pradesh General Sales Tax Act;
The penalty leviable under S. 28(1)(c) is related to the actual tax assessed on the income as finally estimated and the penalty need not be confined to the income shown to have been concealed.'
The decision of the Andhra Pradesh High Court in Kalidindi Subbarajus case was approved by the Supreme Court in Mansukhlal and Brother vs. Commissioner of Income Tax. The Supreme Court held that under S. 28(1)(c) of the Income Tax Act, 1922, when it was discovered that income had been concealed by an assessee, the Income Tax Authorities have to determine what would have been the amount of tax that would have escaped assessment, had the income as shown in the return submitted by him been accepted as correct and that 1 1/2 times of that amount would be the maximum limit within which penalty can be imposed.
5. In view of the above ruling of the Supreme Court in construing an analogous provision, the contention of the learning Standing Counsel must be accepted as correct and the view taken by the Judge (Revision) is unsustainable. He reduced the amount of penalty, proceeding on an erroneous basis as to the maximum extent of penalty permissible under clause (b) of Sub-S. (1) of S. 15-A of the Act Hence such reduction of penalty by him is also unsustainable.
6. For the foregoing reasons we answer both the question in favour of the Revenue and against the assessee and our answers are as follows :-
'1. The revising authority was not justified in holding that for determining the quantum of penalty under clause (b) of Sub-S. (1) of S. 15-A of U.P. Sales Tax Act, only the turnover which had been concealed in the account books should be taken into consideration; the assessing authority should determine what would have been the tax that would have escaped assessment had the turnover as shown in the return been accepted and 1 1/2 times of the said amount would be the maximum limit within which penalty can be imposed.
2. The revising authority was not justified in reducing the amount of penalty to Rs. 150.'
As the assessee is absent and underpresented there will be no order as to costs in this reference.