Reasonable cause defeats tax penalty where genuine C forms and bona fide conduct are established.

Penalty for tax default was not warranted where the C forms were genuine, the purchasing dealers were found to be real, and the assessee had no reason to know that the forms were unauthorised or unusable. Those facts constituted reasonable cause for non-payment of tax, and the revisional authority could delete the penalty while leaving the assessment issue to be remitted. The penalty issue was therefore resolved in favour of the assessee on the factual findings recorded.

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Issues: Whether the Tribunal, while exercising revisional jurisdiction, was justified in setting aside the penalty imposed under section 36(3)(a) of the Bombay Sales Tax Act, 1959, read with section 9(2) of the Central Sales Tax Act, 1956, and in holding that there was reasonable cause for non-payment of tax.

Analysis: The Tribunal found that the C forms produced by the assessee were not bogus or fabricated and had in fact been issued by the Bombay sales tax authorities. It further found that the purchasing dealers were genuine dealers, though one registration had been cancelled and the other dealer had closed business, and therefore the assessee could not have known that the forms supplied to him were unauthorised or unusable. These circumstances were treated as constituting reasonable cause for the assessee's default. In revisional jurisdiction, the Tribunal was competent to sustain part of the order, remit the assessment aspect, and delete the penalty where the factual findings justified that course.

Conclusion: The Tribunal was justified in deleting the penalty, and the question was correctly answered in the affirmative in favour of the assessee.

Final Conclusion: The reference was answered by upholding the Tribunal's view that penalty was not warranted on the facts found, and the assessee succeeded on the penalty issue.

Ratio Decidendi: Penalty for tax default is not justified where the factual findings show bona fide conduct and reasonable cause, and a revisional authority may delete such penalty on the basis of those findings even while remanding the assessment matter.

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