Best judgment assessment does not automatically justify penalty; absence of wilful suppression supported deletion under sales tax law.

Penalty under section 12(3) of the Tamil Nadu General Sales Tax Act was held to be discretionary and not automatic merely because the turnover was assessed on best judgment basis. Although inspection material and omitted receipts supported the assessment, the assessee's explanation that the amounts were premium receipts was relevant to whether there was wilful suppression. As the explanation and surrounding facts did not justify a finding of deliberate concealment, the Tribunal's deletion of penalty was upheld and penalty was not warranted.

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Issues: Whether penalty under section 12(3) of the Tamil Nadu General Sales Tax Act, 1959 was leviable when the taxable turnover was determined on best judgment basis and the assessee's explanation for the unaccounted receipts was not accepted.

Analysis: The pocket note book recovered during inspection contained entries showing receipt of premium for sales, and the omission of Rs. 58,110 from the return stood established. However, penalty under section 12(3) is not automatic merely because assessment is made under section 12(2). The power to levy penalty is discretionary and must be exercised judicially on the facts of each case. The assessee had offered an explanation that the receipts were premium amounts and not part of sale price. Though that explanation failed for assessment purposes, its existence and the surrounding facts were relevant to the question whether there was wilful suppression warranting penalty. The Tribunal found no perversity in declining to infer deliberate suppression and deleted the penalty after considering the material on record.

Conclusion: Penalty under section 12(3) was not warranted and the deletion of penalty was upheld in favour of the assessee.

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