Penalty under VAT can be levied only on the Completion of Assessment Proceedings: Madras HC [Read Order]

Imposing Penalty - ITAT - Taxscan

The division bench of the Madras High Court held that penalty under VAT can be levied only on the completion of Assessment proceedings. The sole grievance of the assessee was that the VAT authorities made a proposal to levy penalty on them in the Show Cause Notice in which a proposal for addition had been made. The petitioners urged that the proposal is without jurisdiction.

Justice Rajiv Shakdher said that as per section 22(4) of the Tamil Nadu VAT Act, if, no return is submitted by the dealer for any period, or, if the return filed is incomplete or incorrect, or, if it is not accompanied by prescribed documents or proof of payment of tax, the Assessment Authority, after making an enquiry, can assess a dealer, by adopting the best judgment principle by granting reasonable opportunity to the dealer to defend his side.

“A bare reading of the sub-section (5) of Section 22 would show that it is only after an assessment is complete under subsection (4) of Section 22, that penalty can be imposed by the Assessing Officer. However, it can, either be imposed at the time when, the assessment order is passed, or, by way of a separate order, albeit, after the assessment order is passed. Therefore, the proposal in the show cause notice to levy penalty at the rate of 150% prior to adjudication demonstrates premeditation.”

Read the full text of the Order below.

taxscan-loader