Penalty after best judgment assessment upheld where deliberate suppression and notice before penalty were recorded.

Penalty under the Andhra Pradesh General Sales Tax Act could be initiated after a best judgment assessment, because section 14(2) was read as permitting separate penalty consideration once the assessment under section 14(1) supplied the basis. The proviso required notice and a reasonable opportunity before penalty was imposed, not simultaneous issuance with the assessment. The penalty order was also upheld because it recorded that taxable turnover had been withheld with dishonest intent to evade tax, which was treated as sufficient disclosure of deliberate suppression. The challenge to the levy of penalty therefore failed.

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Issues: (i) Whether penalty under section 14(2) of the Andhra Pradesh General Sales Tax Act, 1957 could be levied after completion of a best judgment assessment under section 14(1), and whether the notice for penalty had to be issued simultaneously with the assessment. (ii) Whether the penalty order was invalid for not recording intentional or deliberate suppression of turnover.

Issue (i): Whether penalty under section 14(2) of the Andhra Pradesh General Sales Tax Act, 1957 could be levied after completion of a best judgment assessment under section 14(1), and whether the notice for penalty had to be issued simultaneously with the assessment.

Analysis: The expression "when making an assessment to the best of judgment under sub-section (1)" was read in the context of the scheme of section 14 and its proviso. The power to levy penalty was held to arise in cases of deliberate suppression, but its exercise did not have to be simultaneous with the best judgment assessment. The assessment under section 14(1) formed the basis for considering penalty under section 14(2), and the proviso required notice and a reasonable opportunity before any penalty was directed. This showed that an enquiry and separate consideration of penalty were contemplated after the assessment.

Conclusion: The penalty proceedings were not invalid merely because the notice and penalty order were issued after the best judgment assessment.

Issue (ii): Whether the penalty order was invalid for not recording intentional or deliberate suppression of turnover.

Analysis: The order was examined to see whether it disclosed deliberate suppression. It recorded that taxable items had been withheld with the dishonest intention of evading sales tax and specifically stated that the assessee would have successfully evaded tax but for detection of private accounts. That was treated as sufficient disclosure of the requisite mens rea for levy of penalty.

Conclusion: The penalty order was not invalid on this ground.

Final Conclusion: The writ petitions failed, and the challenge to the levy of penalty was rejected in full.

Ratio Decidendi: Section 14(2) authorises penalty proceedings to be initiated after a best judgment assessment under section 14(1), and the proviso requires a prior opportunity before penalty is imposed, not simultaneous initiation with the assessment.

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