Penalty for non-filing of return upheld where the assessee's claim rested on an unproven factual assumption, not an arguable legal position.

Penalty for failure to file a return was sustained where the assessee relied on a bona fide belief that cotton purchases were not last purchases within the State, but that belief rested on an unproven factual assumption rather than a genuinely arguable legal position. The court distinguished the earlier authority relied on by the assessee because, in that case, the disputed position itself was truly arguable, whereas here the factual basis for the stand was not established. The Tribunal's reduction of the penalty to a token amount was treated as justified in the circumstances, and the limited stigma attached to that penalty was not a ground for complaint.

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Issues: Whether penalty under section 12(3) of the Madras General Sales Tax Act was justified where no return was filed on the assessee's claim of a bona fide belief that the cotton purchases were not last purchases within the State.

Analysis: The assessee did not file a return because it believed it had material to show that the purchases were not last purchases, but that belief was not treated as an arguable legal position comparable to the earlier case relied on. The court distinguished that earlier decision on the footing that there the disputed position itself was genuinely arguable, whereas here the assessee simply failed to establish the factual basis for its stand. The reduction of penalty to a token amount by the Tribunal was treated as justified in the circumstances, and the assessee could not complain of the limited stigma attached to such a penalty.

Conclusion: The penalty under section 12(3) was held to be proper and was sustained.

Ratio Decidendi: A penalty for failure to file a return is sustainable where the assessee's non-filing is based on an unproven factual assumption and not on a genuinely arguable legal position.

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