Reasonable cause for sales tax default turned on genuine financial difficulty and absence of mala fide intention.

Penalty for failure to deposit admitted sales tax within time depended on whether the assessee had reasonable cause for the default under section 15-A of the U.P. Sales Tax Act. The Tribunal accepted the assessee's financial difficulty on facts, noting a genuine business slump, reduced sales, declining bank credit, creditor pressure, and absence of mala fide intention. The Court treated financial difficulty as a relevant circumstance in some cases and distinguished situations involving diversion of collected tax or self-induced default. As no error of law was shown in the Tribunal's finding of lack of mala fides and tight financial position, the penalty was not interfered with.

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Issues: Whether penalty for non-deposit of admitted sales tax within time was justified when the assessee pleaded financial difficulty as the cause of default.

Analysis: Penalty under section 15-A of the U.P. Sales Tax Act depended on the absence of reasonable cause for failure to pay tax within the prescribed time. The assessee's plea of financial strain was examined on the facts and accepted by the Tribunal, which found a genuine business slump, reduced sales, declining bank credit, pressure from creditors, and no mala fide intention. The Court also noted that financial difficulty may in some cases constitute a relevant circumstance, but distinguished cases where collected tax had been diverted elsewhere and the default was self-induced. On the record, the Tribunal's conclusion that the assessee was in a tight financial position and lacked mala fides was not shown to suffer from any error of law.

Conclusion: The penalty was not liable to be interfered with, and the revisions failed.

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