1. In all these petitions the same firm is the petitioner. In the petitions it is prayed that the place of business of the petitioner and the residence of the managing partner were inspected by the Deputy Commercial Tax Officer (Intelligence), Thanjavur, and other officers on 3rd March, 1976, and that they recovered anamath accounts for the years 1971-72 to 1975-76. On the seizure of the records, the inspecting officers have recorded a statement from the petitioner's managing partner, and thereafter proceeded to initiate action under section 45(2)(cc) for contravention of section 40(1) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called as the Act). The authorities, on the basis of the so-called admission, proceeded to impose a penalty of Rs. 1,000 for each accounting year as if the petitioner had asked for compounding the offence.
2. In these petitions, the first point taken by the learned counsel for the petitioner is that in so far as W.P. No. 5765 is concerned, since section 45(2)(cc) came into effect only on and from 1st December, 1972, it could not be applicable in respect of the assessment year 1971-72. There being no retrospective application, this point taken deserves to be upheld, and in this view, in respect of the said year the penalty imposed cannot be sustained.
3. As for the other assessment years, he proceeds to contend that after the seizure of the records, when proceedings were initiated for reopening the assessment already made, ultimately, when the matter was decided by the Tribunal on 31st October, 1978, it was come to the conclusion that the so-called anamath accounts and the regular accounts tally, and that the so-called anamath accounts were maintained only to circumvent some other Act controlling the supply of controlled commodities such as urea and ammonium sulphate and that there was no wilful intention of suppressing the taxable turnover, and when such is the conclusion arrived at by the Tribunal, on the account books taken custody of on 3rd March, 1976, the impugned order passed on a so-called admission made, and the authorities understanding it as if the anamath accounts disclosed different transactions, had resulted in erroneous orders passed imposing the maximum penalty and hence it necessarily requires to be reconsidered.
4. Regarding seizure of the account books and reopening of the assessments, in paragraph 8 of the order of the Tribunal dated 31st October, 1978, in the earlier part, it comes to the firm conclusion that the anamath accounts tally with the regular accounts. It also gives a finding that the anamath accounts were maintained evidently to circumvent some other enactment and that there was no wilful intention to suppress the taxable turnover. This finding is the outcome of the Tribunal being satisfied that the amount involved being not formed part of the earlier assessments made, the books having been maintained for different purposes not connected with the turnover involved under the Sales Tax Act, it has thought it fit to remit the five cases back to the assessing officer for fresh disposal in the light of the findings rendered by it. In so doing, in the same paragraph in the later portion it is stated :
'In the instant case the excess found with reference to fertilisers and pesticides in the personal diaries had escaped assessment and the first sales turnover of such excess quantity had to be estimated by best judgment.'
5. This conclusion only discloses that the anamath accounts by and far reflect only the accounts which are already entered in the regular account books.
6. On the matter being remitted, the Deputy Commercial Tax Officer (Intelligence), Thanjavur, has passed order in respect of the assessment years 1971-72 and 1973-74. In dealing with the assessment year 1971-72 he found that the tax due is only Rs. 3 and the excess tax of Rs. 478 was directed to be refunded in form C. He has not given any finding that the anamath accounts disclosed any material different from that of the regular accounts, except in regard to the proportion which was adopted by the Tribunal relating to fertilisers to be fixed at 50 per cent.
7. As for the assessment year 1973-74, the order discloses that the total turnover involved in the anamath accounts for old newspapers and fertilisers was Rs. 2,040.50 and ultimately held that the additional tax payable is Rs. 38.
8. Therefore, when these orders themselves disclose that the anamath accounts do not disclose as if they deal with transactions not even accounted for in the regular accounts, and whatever disparity made out, having been found to be marginal, undoubtedly if the respondent while passing these orders had comprehended the extent to which the escapement could have been there, would not have imposed the maximum penalty as had been done in respect of the assessment year.
9. While imposing penalty the extent to which any contravention committed would be a relevant factor. There is nothing to indicate that, while passing the order, the authorities had comprehended the extent to which the escapement has occasioned and as now made out in the order of the Tribunal. It is in this context the learned counsel for the petitioner refers to Hindustan Steel Ltd. v. State of Orissa : 83ITR26(SC) wherein it was held hat penalty will not be imposed merely because it is lawful to do so, and before even the discretion is exercised, the concerned authority must take into account all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.
10. What the learned counsel endeavours to point out is, before the maximum penalty was imposed, it was necessary for the authority to comprehend the extent to which there could have been contravention. When the Tribunal has since passed orders after scrutiny of the accounts that they do tally with the regular accounts, and no wilful intention was there to suppress the taxable turnover, and only in regard to fertilisers and pesticides there is some marginal escapement of assessment, the matter calls for not only fresh consideration, but to be approached in the perspective in which the Tribunal decided on the extent of escapement. There is considerable force in this contention, in the light of what has ultimately turned out, after careful scrutiny of the anamath accounts.
11. Though the counsel for the respondent would state that the penalty is based upon the so-called confession or admission made by the petitioner, it becomes totally irrelevant, when the Tribunal, on a consideration of the documents, had come to the conclusion that the anamath accounts had not disclosed any independent transaction dealt with apart from the transactions found in the regular accounts. The consent had been taken, according to the petitioner, at a time when coercive actions were being taken and arbitrary decisions were being arrived at. This plea is, to a certain extent, acceptable, because when on assessment of what has happened, it being made out that there is only a marginal difference and no wilful intention to avoid the payment of tax under the Act, certainly the petitioner would not have given the consent for being penalised and compelled to pay the maximum penalty. Hence, under the circumstances above-stated, it cannot be said that his so-called consent or statement could still be relied upon by the respondent, and as if the order passed cannot no longer call for any fresh consideration.
12. Therefore, without reference to the so-called consent given by the petitioner, it is now incumbent upon the respondent to consider the matter, on what has since been made out by the orders of the Tribunal and that of the Deputy Commercial Tax Officer, in the aforesaid two orders and proceed to find out whether in the circumstances of the case necessarily call for imposition of any penalty whatsoever. In so doing, it has to give reasons as to why there is need for imposing any penalty and also justify the quantum of penalty that is being imposed. Such consideration could be only in respect of the assessment years 1972-73 to 1975-76. In this view all these writ petitions are allowed. No costs.
13. Petitions allowed.