Penalty before assessment under sales tax law is invalid where tax liability is not yet determined.

Penalty under section 15-A(1)(b) of the U.P. Sales Tax Act could not be imposed before completion of the relevant year's assessment because the tax payable had not yet been determined. The assessing authority could examine the correctness of the returns only at the stage of regular assessment, and a later amendment to rule 41(3) was prospective and did not apply. On the date of the penalty order, the assessee's admission of escaped turnover could not be relied on, as the authority lacked jurisdiction to use it for penalty at that stage. The penalty order was therefore unsustainable in law.

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Issues: (i) Whether penalty under section 15-A(1)(b) of the U.P. Sales Tax Act could be imposed before the assessment for the relevant year was completed. (ii) Whether, on the date the penalty was imposed, there was material on record to justify penalty of Rs. 4,200.

Issue (i): Whether penalty under section 15-A(1)(b) of the U.P. Sales Tax Act could be imposed before the assessment for the relevant year was completed.

Analysis: The power to impose penalty under section 15-A depended on the tax payable by the dealer, and the tax payable could be determined only when the assessment for the year was completed. Under rule 41(3) of the U.P. Sales Tax Rules as it then stood, the assessing authority could examine the correctness of the returns only at the stage of regular assessment at the end of the year. The later amendment to rule 41(3) could not govern the case because it was prospective in operation.

Conclusion: Penalty could not be imposed before completion of the assessment, and the answer to the first question was in the negative.

Issue (ii): Whether, on the date the penalty was imposed, there was material on record to justify penalty of Rs. 4,200.

Analysis: Once the authority had no jurisdiction to consider the correctness of the quarterly returns on that date, the assessee's statement admitting escaped turnover could not be used as material for imposing penalty at that stage. The relevance of such an admission could arise only when the fact sought to be proved was lawfully open for determination.

Conclusion: There was no material that could validly be relied upon on the date of the penalty order, and the answer to the second question was in the negative.

Final Conclusion: The reference was answered in favour of the assessee, and the penalty order was unsustainable in law.

Ratio Decidendi: Penalty linked to assessed tax cannot be imposed before regular assessment is completed, and material relevant to concealment or inaccurate particulars cannot be relied upon until the authority is lawfully competent to determine the issue.

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