Wrong citation in penalty notice does not defeat proceedings absent prejudice; financial stringency alone is no reasonable cause.

A wrong recital of the penal sub-section in a show-cause notice does not invalidate penalty proceedings where the assessee receives an effective opportunity to explain the default and no prejudice is shown. Financial stringency, standing alone, and the grant of extensions or instalments for payment do not establish reasonable cause for failure to pay tax within time, especially where the assessee continued to default even during the extended period and had collected tax from customers. The penalty levy was therefore upheld.

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Issues: (i) Whether penalty orders were vitiated because the show-cause notice referred to section 36(3) of the Bombay Sales Tax Act, 1959 and section 45(5) of the Gujarat Sales Tax Act, 1969 instead of the corresponding penal provisions applicable to the case. (ii) Whether financial stringency and the grant of extensions of time or instalments constituted reasonable cause for non-payment of tax within the prescribed time.

Issue (i): Whether penalty orders were vitiated because the show-cause notice referred to section 36(3) of the Bombay Sales Tax Act, 1959 and section 45(5) of the Gujarat Sales Tax Act, 1969 instead of the corresponding penal provisions applicable to the case.

Analysis: The statutory provisions for penalty under section 36(3) of the Bombay Sales Tax Act, 1959 and section 45(5) of the Gujarat Sales Tax Act, 1969 required notice and an opportunity to show reasonable cause before penalty could be imposed. The notice in substance called upon the assessee to explain the default, and the assessee in fact responded and disclosed its defence. A mere wrong mention of the sub-section did not invalidate the proceedings where the authority had power under the correct provision and no prejudice was caused.

Conclusion: The penalty orders were not vitiated by the wrong reference to the sub-section in the notice.

Issue (ii): Whether financial stringency and the grant of extensions of time or instalments constituted reasonable cause for non-payment of tax within the prescribed time.

Analysis: The lower authorities found that the assessee had defaulted even within the extended time and that the plea of financial stringency was not genuine. The assessee had also collected tax from customers, and the extensions of time were granted with the stipulation that liability to penalty would continue. On these facts, extension of time or instalments by itself could not amount to reasonable cause under the penal provisions.

Conclusion: Financial stringency and the grant of extensions did not constitute reasonable cause to escape penalty.

Final Conclusion: The reference was answered against the assessee, and the levy of penalty was upheld.

Ratio Decidendi: A wrong recital of the penal provision in a show-cause notice does not invalidate penalty proceedings when the assessee is given an effective opportunity to explain the default and suffers no prejudice, and extension of time for payment does not by itself establish reasonable cause for statutory default.

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