Mere Non-Disclosure does not lead to Penalty u/s 27(3) of the TNVAT Act: Madras HC [Read Judgment]

In a recent ruling, the single bench of the Madras High Court observed that mere non-disclosure cannot be sole ground for invoking penalty under section 27(3) of the Tamil Nadu VAT Act.In the opinion of the Court, the non-disclosure must be done by the assessee with an intention to evade the payment of tax.

In the instant case, the petitioners approached the High court through a writ petition challenging the order of penalty under s. 27(3) of the Act imposed by the authorities in consequent to a surprise visit conducted on the business premises. The assessee contended that willful suppression cannot be alleged while considering the petitioner's conduct in paying the tax at the time of inspection prior to issuance of show cause notice can be taken into consideration.

Allowing the petition, Justice T.S Sivagnanam observed that “In terms of the said provision to levy penalty the Assessing Officer should record his satisfaction that escapement of tax was due to willful non-disclosure. Mere non-disclosure does not automatically lead to levy of penalty. The statute contemplates levy of penalty in cases of willful non-disclosure. Therefore, the petitioner's conduct in paying the tax at the time of inspection prior to issuance of show cause notice can be taken into consideration. Similarly also with regard to equal time addition. Therefore, this Court is of the view that assessment should be re-done on these two heads.”

Read the full text of the Judgment below.