The imposition of penalties under the Kerala Value Added Tax Act necessitates proper consideration of objections raised by the taxpayer, particularly when assessments have already been completed by the Income Tax Department.

JUDGMENT

The petitioner is stated to be a public limited company engaged in providing credit facilities on the security of gold ornaments being pledged by its customers. It is stated to be an assessee under the provisions of the Kerala Value Added Tax Act, 2003 (hereinafter referred to as the 'Act') with respect to the activities - sale of pledged articles - taking place in the State of Kerala. The petitioner is also stated to have obtained registration under the provisions of the respective Value Added Tax Acts in the other States in India where it is having its presence. The petitioner is also stated to be an assessee under the provisions of the Income Tax Act, 1961 . The dispute in this writ petition is with reference to the imposition of penalty under the provisions of Section 67 of the Act, as regards the assessment years 2015-16 and 2016-17.

2. The petitioner's business premises, both in Kerala as well as in other States, have been searched by the Income Tax Department on various dates. On the basis of the details so obtained pursuant to the search as above, proceedings were taken against the petitioner by the Income Tax Department. Simultaneously, the details of the search were also forwarded to the assessing authorities under the provisions of the Act, within the State of Kerala. The details of the inspection so forwarded to the assessing authority under the Act in Kerala is available at Ext.P2. On the basis of the details so received, the respondent herein issued Ext.P1 and Ext.P2 notices under Section 67 of the Act dated 13.11.2018, proposing to impose penalty on the petitioner. The allegation in the notices at Ext.P1 and Ext.P2 is to the effect that though the petitioner had substantial sales of NPA gold as detected by the Income Tax Department, the sales disclosed while filing returns under the Act is only a lesser figure. Therefore, the difference between the afore figures is proposed to be treated as a suppressed amount, and penalty under proposed to be imposed. The difference noticed by the 1^st respondent while issuing Ext.P1 and Ext.P2 is as under:-

The petitioner, in reply to the notices received as above, filed detailed replies at Ext.P14 and Ext.P15. In the afore replies, the petitioner has pointed out that:-

(i) The Income Tax Department has compared the market value of gold on the date of auction as well as the declared value and has adopted the market value to arrive at undisclosed income in the proceedings under the provisions of the Income Tax Act.

(ii) The petitioner also pointed out that there is a “release income” also considered by the Income Tax authorities, which represents the amount deposited by the petitioner's customers when the gold is released on the intervention of the third parties, and the afore income is assessable only under the provisions of the Income Tax Act, since there is no sale of gold.

(iii) The petitioner further pointed out that it is having transactions both within Kerala and outside the State, and the details detected by the Income Tax Department is with reference to the businesses “all over India” and, if at all any proceedings could be initiated, that can only be with reference to the activities within the State of Kerala.

3. However, by the impugned orders at Ext.P35 and Ext.P36, the respondent herein has imposed a penalty of Rs.40,18,41,794/- for the year 2015-16 and Rs.12,58,47,780/- for the year 2016-17. On account of the afore, the petitioner is before this Court seeking to challenge the imposition of penalty as above.

4. I have heard Sri. Jolly John, the learned counsel for the petitioner as well as Sri. Alan Priyadarshi Dev, the learned Government P