Assessment Made To Best Of Judgment Of Authority Would Not Be Sufficient For Imposition Of Penalty: Madras High Court

The Madras High Court ruled that assessing the best of the authority’s judgement would not be sufficient for the imposition of penalty since the degree of proof required for the imposition of penalty is significantly higher than that required for forming a best judgement assessment.

The single bench of Justice Anita Sumanth observed that the petitioner admittedly remitted the difference in tax plus interest even during the inspection. The imposition of a penalty under Section 27(3) of the Tamil Nadu VAT Act was both automatic and illegal. Case- N/s. Sayar Cars Versus The Appellate Deputy Commissioner (CT)



The petitioner/assessee is a registered dealer in Vellore for the sale and repair of Chevrolet vehicles in accordance with the requirements of the TNVAT Act. Following an investigation of the petitioner’s premises in February 2016, Enforcement Wing officers framed assessments for the years 2013–14, 2014–15, and 2015–16. As a result of the inspection, it was discovered that the petitioner’s monthly reports were missing crucial information. Two specific problems were highlighted. The first was a discrepancy between invoiced and realized sales volume, and the second was a discrepancy between asking and realized prices for previously owned vehicles.

Petitioner claimed that authorities had moved forward only on the basis of proposals by enforcement officers, which included a plan to impose a penalty. The assessing authority is not “confident that the escape from the assessment is due to the deliberate non-disclosure of assessable turnover by the dealer,” as required by Section 27(3), and hence the show cause notice is invalid. For this reason, the officer’s approval is contingent not only on the dealer’s honesty regarding non-disclosure but also on the dealer’s ability to generate taxable revenue. Officers must be convinced not only that information was withheld, but also that this concealment was intentional.


While upholding the appeal, the court reasoned that the assessing authority failed to make a conclusion that the assessee intentionally concealed or failed to report a significant portion of their revenue. Because of this, any punishment imposed would be null and void.

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Judgement reviewed by Deepa Bajaj.

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