V.K. Mehrotra, J.
1. In this revision under Section 11(1) of the U.P. Sales Tax Act, theapplicant-dealer has challenged the order imposing a penalty upon him under Section 15-A(1)(c) of the U.P. Sales Tax Act. The amount of penalty is Rs. 1,800 and it relates to the year 1977-78.
2. During the course of assessment proceedings for the year aforesaid, the applicant's accounts were rejected and its turnover determined by estimate. The order was upheld in appeal by the Assistant Commissioner (Judicial), Sales Tax, who reduced the taxable turnover to some extent. The assessment order was affirmed by the Sales Tax Tribunal in second appeal.
3. There was a survey of the business premises of the dealer on 23rd April, 1977, during which a diary was found containing entry of sale of a steel box for Rs. 400. This was not entered in the account books nor was any cash memo issued. The case of the dealer was that the amount aforesaid represented part payment received by him towards sale on credit and that the transaction was completed on 25th April, 1977, when a cash memo was issued.
4. There was another survey of the business premises of the dealer on 7th August, 1978. As against the declared number of workmen by the dealer, namely, six, eight persons were found working. On this account, the inference that was drawn by the authorities was that the dealer had not been fully disclosing the extent of manufacture made by him and consequently the sales.
5. The dealer's explanation in regard to the entry of Rs. 400 was also not accepted by the assessing authority which came to the conclusion that in fact, the dealer had made sale of steel box on the date mentioned in the diary without disclosing it in the books. This, according to the assessing authority, clearly showed a case of concealment of sales by the dealer. The view in this regard was upheld up to the second appellate stage.
6. Apart from subjecting the taxable turnover determined by estimate (to tax), the assessing authority initiated proceedings for the levy of penalty upon the dealer for concealment of the particulars of his turnover. Without much discussion, the assessing authority imposed, for the year in question, penalty to the extent of Rs. 2,800. In appeal, the Assistant Commissioner (Judicial), Sales Tax, took the view that particulars of the turnover were being concealed by the dealer, and like the assessing authority, disbelieved the explanation of the dealer in regard to the entry of Rs. 400. He however reduced the amount of penalty to Rs. 1,800. The Tribunal upheld the order so passed.
7. A perusal of the order of the Tribunal shows that it was of the opinion that positive concealment in regard to the sale proceeds of the steel trunk had been found added to which was the act of suppression by the dealer of the extent of his manufacture as was evident from the disclosure of lesser number of employees working with him by the dealer. These two facts, according to the Tribunal, fully justified the imposition of penalty and the extent thereof.
8. It has been urged by Sri R.C. Sharma for the dealer that the order imposing penalty was unsustainable and so was the amount of penalty imposed. His submission is that as far as the facts appearing from the survey dated 1st August, 1978, were concerned, they could not be taken into consideration at all for they related to the year subsequent to the one in question and also that the mere fact of rejection of explanation of the dealer in regard to the entry of Rs. 400 during the assessment proceedings was not enough to justify the imposition of penalty.
9. It has not been seriously disputed that the survey dated 7th August, 1978, was not made during the year for which penalty has been imposed. The facts appearing in that survey were obviously not relevant. Partly, therefore, the order of the Tribunal is based upon a consideration which was not relevant to the controversy before it.
10. The learned standing counsel has seriously disputed the stand of Sri Sharma that the conclusion based upon the entry of Rs. 400 found during the survey on 23rd April, 1977, could not be relied upon to sustain the order of the Tribunal. His submission is that while dealing with the matter of imposition of penalty, the Assistant Commissioner (Judicial) considered this fact independently of the conclusion arrived at in regard thereto during the assessment proceedings and recorded a finding that the dealer had indulged in concealment of the particulars of his turnover. As such, according to the submission, no fault could be found with the order imposing penalty in this case.
11. In Commissioner of Income-tax v. Anwar Ali : 76ITR696(SC) , the Supreme Court dealt with the matter relating to imposition of penalty under the Income-tax Act, 1922. Section 28(1)(c) of that Act was akin to the provision contained in Section 15-A(1)(c) of the U.P. Sales Tax Act. After noticing the divergent opinions expressed by various High Courts the Supreme Court concluded that the provision aforesaid was penal in the sense that it was meant to provide a deterrent against the recurrence of default on the part of the assessees. As such the burden of proving the fact that there was concealment of the particulars of income by an assessee was on the department. It had to be established on material apart from the explanation offered by the assessee which may have been disbelieved, in regard to a particular item of income. It observed thus :
It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings : Hindustan Steel Ltd. v. State of Orissa : 83ITR26(SC) . In England also it has never been doubted that such proceedings are penal in character....As has been rightly observed by Chagla, C.J., in Commissioner of Income-tax v. Gokuldas Harivallabhdas : 34ITR98(Bom) , the gist of the offence under Section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, and therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income..It must be remembered that the proceedings under Section 28 are of a penal nature and the burden is on the department to prove that a particular amount is a revenue receipt. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income. It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conculsive. However, it is good evidence. Before penalty can be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars.
12. In that case, entries were found in the accounts of the assessee showing deposit of the sum of Rs. 87,000. According to the assessee, this amount was not his income but had been deposited by his relations in his account on account of disturbed conditions in the State of Bihar. The explanation was not accepted by the authorities and the assessee was penalised for not having disclosed the sum aforesaid as part of his own income.
13. The observations aforesaid, clearly indicate that apart from the fact that the explanation which is furnished by a dealer in regard to the concealed part of the turnover in question is found incorrect, the conclusion that it was concealment by him of particulars of his turnover has to be founded upon material de hors the one upon which his explanation was asked for earlier. In other words, the false explanation of the dealer and the material in regard to which it had been obtained from him are not to be considered to be sufficient to sustain a conclusion that a dealer had concealed particulars of his turnover. This is the view which was taken by this Court in the case of Satya Confectionary Works v. Commissioner of Sales Tax printed infra ; 1980 UPTC 356.
14. The learned standing counsel has vehemently urged that, in the present case, the authorities had applied their minds independently to the question of concealment while dealing with the penalty matter and had not based their conclusion merely on the findings recorded at the time of the assessment proceedings. As such, the requirement of independent proof of the fact of concealment was fulfilled. It is difficult to accept this submission in the facts of the present case. The appeals against the order of assessment as well as the one imposing penalty were dealt with together by the appellate authority. Having upheld the rejection of the explanation of the dealer in regard to the sum of Rs. 400 found entered in the diary at the time of survey in April, 1977, the appellate authority proceeded to take the view that the dealer had concealed the particulars of his turnover. The finding in this regard was not based upon any material other than the one which was available for consideration during the assessment proceedings. In such a situation it is not possible to take the view that the conclusion about concealment by the dealer of particulars of his turnover was arrived at on the basis of material de hors that which was available at the time of assessment proceedings itself or that any independent consideration in regard to it was made.
15. Since the authorities have not found by an objective assessment of material, other than the one available to them for the purpose of assessment proceedings, that there was concealment of particulars of his turnover by the applicant-dealer, it is obvious that the order of penalty cannot be sustained.
16. The revision succeeds and is allowed. The order of imposition of penalty upon the dealer is set aside. However, the parties are directed to bear their own costs.