Penalties cannot be sustained without evidence of willful disobedience or suppression of turnover.

1. The petitioner, who owns a Hotel and does business in the hospitality sector, is an assessee under the Kerala Tax on Luxuries Act, 1976. In the writ petition, the petitioner impugns Exts.P1, P2, P3 and P4 orders passed by the respective authorities under the Kerala Tax on Luxuries Act, confirming a penalty that was imposed on him for alleged contravention of the provisions of the Kerala Tax on Luxuries Act and Rules. Exts.P1 and P2 are the penalty orders that were passed by the Intelligence Officer. In the penalty orders, the Intelligence Officer imposed a penalty of Rs.3,30,490/- and Rs.3,17,378/-, respectively, for the assessment years 2007-08 and 2008-09, on the finding that, insofar as the petitioner had not separately shown the charges collected towards Hall rent in the bill raised on the customers who had hired the same for functions, the provisions of R.3C of the Kerala Tax on Luxuries Rules, 1976 required that 25% of the total charges realised be treated as rent and other charges. The Intelligence Officer therefore took 25% of the amounts realised by the petitioner from his customers, and subjected the said amount to luxury tax @ 15%. The penalty imposed was twice the tax figure arrived at on the basis of the said computation. Aggrieved by the said orders, the petitioner carried the same in appeals before the First Appellate Authority, but the appeals were rejected by Ext.P3 order. In the second appeal preferred by the petitioner, the Appellate Tribunal, in Ext.P4 order, found that there was no willful disobedience or deliberate intention on the part of the petitioner, to suppress the turnover or to evade tax, but finding that the petitioner had nevertheless committed the offence of filing an incorrect or incomplete return, reduced the penalty imposed on the petitioner to half of what was imposed on him by the Intelligence Officer. In the writ petition, the petitioner is essentially aggrieved by Ext.P4 order of the Appellate Tribunal.

The learned Senior Counsel appearing for the petitioner would submit that the Appellate Tribunal erred in confirming the penalty on the petitioner, even to the reduced extent indicated in Ext.P4, since, there was a positive finding that there was no willful disobedience or deliberate intention on the part of the assessee to suppress the turnover or to evade tax. It is also pointed out by the learned Senior Counsel that, in the assessment proceedings for the years in question, the petitioner was subjected to assessment to luxury tax on 25% of the amounts that he had received from letting out of the hall for various functions, and this was despite the fact that on the entire amount received through the letting out of the hall, he had already discharged tax under the Kerala Value Added Tax Act [hereinafter referred to as the 'KVAT Act'], at the rate applicable to food and beverages. The learned senior counsel would specifically point out that, in the absence of any finding by the authority, that there was any amount collected over and in addition to what was declared in the returns under the KVAT Act, as obtained from the letting out of the halls in question, there was no justification on the part of the authorities under the Kerala Tax on Luxuries Act, to levy tax under the said Act @ 15% on a turnover representing 25% of what was collected by the petitioner through the letting out of the halls in question. The learned senior counsel would further point out that, at any rate, the petitioner paid not only the luxury tax assessed in respect of the two halls, but also an additional tax on amounts that had been estimated by the Assessing authority during the said years towards probable omissions and suppressions. It is stated that in order to purchase peace with the dep