Discretionary penalty for delayed advance tax payment requires a fair hearing and consideration of good cause before levy.

Penalty for delay in payment of advance tax under section 12-B(3) of the Karnataka Sales Tax Act is not automatic on proof of default. The assessing authority must exercise the penal discretion judicially, consider whether there was good and sufficient cause or a conscious and deliberate default, and give the assessee an effective opportunity to substantiate an explanation such as outstanding sale proceeds on credit transactions. Where the explanation is rejected without calling for supporting material and without proper application of mind, the penalty order is vitiated. The matter was remitted for fresh opportunity and reconsideration of the penalty question.

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Issues: Whether the penalty imposed under section 12-B(3) of the Karnataka Sales Tax Act, 1957 was sustainable when the assessee's explanation for delay in payment of advance tax was rejected without calling for supporting material and without a proper exercise of discretion.

Analysis: Penalty for default in advance tax is not automatic on mere proof of delay. The authority must exercise the power under section 12-B(3) judicially, consider the relevant circumstances, and test whether there was good and sufficient cause or a conscious and deliberate default. Where the assessee asserts inability to pay because sale proceeds are outstanding on credit transactions, the authority must give an effective opportunity to substantiate that plea before proceeding to levy penalty. In the absence of such consideration and opportunity, the order suffers from want of application of mind and offends the requirements governing exercise of discretionary penal power.

Conclusion: The penalty order could not be sustained in the form in which it was made, and the matter had to be remitted for a fresh opportunity to the assessee and reconsideration of the penalty question by the assessing authority.

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