Best judgment assessment penalty cannot be created later by erratum when the original order imposed none.

In a best judgment sales tax assessment, penalty under section 12(3) must be considered and imposed, if at all, as part of the same composite enquiry. Silence in the original assessment order on penalty indicated that no actual levy had been made; a mere proposal was insufficient. An erratum could not later be used to create a fresh penalty levy where the original order did not impose one. The Madras HC therefore treated the penalty as invalid and sustained the assessee's objection.

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Issues: Whether penalty under the sales tax assessment could validly be imposed by an erratum when the original best judgment assessment order contained no actual levy of penalty.

Analysis: The assessment and the penalty under sub-section (3) of section 12 form part of one composite enquiry in a best judgment assessment. The assessing authority is required to decide at the time of making the assessment whether penalty should be levied, and silence in the assessment order on penalty indicates that the authority did not make such levy. Once the original order contained only a proposal and no actual imposition, a later erratum could not be used to create a fresh levy of penalty.

Conclusion: The levy of penalty by erratum was invalid and could not stand; the finding is in favour of the assessee.

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