Bona fide collection of additional tax on reasonable expectation of threshold breach defeats penalty under sales tax law.

Penalty under sales tax law is not to be imposed mechanically where the assessee collects additional tax on a bona fide expectation that turnover will cross the statutory threshold. Because the assessee had previously exceeded the limit and could reasonably anticipate a similar position, its advance collection of tax was treated as a genuine act rather than a culpable breach. Penalty proceedings under tax statutes are quasi-criminal, so the authority must consider reasonable cause and bona fide conduct before imposing penalty. On those facts, penalty was held not leviable and the setting aside of the penalty was in accordance with law.

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Issues: Whether penalty under sub-section (qq) of section 15-A of the Sales Tax Act was sustainable when the assessee collected additional tax under section 3-F on the bona fide expectation that turnover would cross the prescribed limit.

Analysis: Penalty under the sales tax law could not be imposed mechanically merely because the amount collected ultimately exceeded the tax legally payable. The liability to pay additional tax arose only if the turnover crossed the statutory threshold, and the assessee had a prior year in which its turnover exceeded that limit. On those facts, the assessee could reasonably expect that the limit would again be crossed and therefore collect the additional tax in advance rather than wait until the end of the year and bear the burden from its own pocket. Penalty proceedings under tax statutes are quasi-criminal in nature, and the assessing authority must be satisfied that the breach justifies penalty. The revising authority was therefore justified in treating the conduct as bona fide and in holding that penalty was not warranted.

Conclusion: Penalty was not leviable and the order setting aside the penalty was in law.

Ratio Decidendi: In penalty proceedings under tax statutes, bona fide conduct and reasonable cause must be considered, and penalty is not warranted where the assessee's collection of tax was based on a genuine expectation arising from the surrounding facts.

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