Rebuttable presumption in sales tax penalty can be defeated by disclosure of turnover and accepted books of account.

Penalty under a sales tax provision must be construed strictly, and rebuttable presumptions under the two explanations operate on different factual bases. Explanation (2) applies only where returns are not filed in time without sufficient cause and the assessment proceeds on that footing; where belated returns were accepted, assessment was made on their basis, and the books disclosed the correct turnover without discrepancy, the presumption of concealment was rebutted. The note also states that the appellate authority may invoke the correct explanation if notice and opportunity are given, but rebuttal is not confined to proving that no turnover was taxable.

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Issues: Whether the penalty under section 36(2)(c) of the Bombay Sales Tax Act, 1959 could be sustained by the appellate authority by invoking Explanation (2), where the returns were filed belatedly but were accepted and the assessment was completed on their basis, and whether the presumption of concealment stood rebutted on the facts.

Analysis: Section 36(2)(c) is a penal provision and must be construed strictly. Explanation (1) and Explanation (2) are rules of evidence creating rebuttable presumptions, but they operate on different factual foundations. Explanation (1) applies where assessed tax paid is below the stipulated percentage, while Explanation (2) is attracted only where returns are not furnished within time without sufficient cause and the assessment proceeds on the basis contemplated by that Explanation. The appellate authority has wide powers and may invoke the correct explanation, provided the assessee is given notice and an opportunity to meet it. On the facts, the assessee filed the returns late, they were taken on record, and assessment was made on that basis. The materials did not justify the assumption that the delay was without sufficient cause. In any event, the assessee had disclosed the correct turnover in the returns and books of account, which were accepted without discrepancy, so the presumption of concealment was rebutted. The view that rebuttal was possible only by showing that no turnover was liable to tax was held to be erroneous.

Conclusion: Explanation (2) was not rightly invoked, and the penalty under section 36(2)(c) could not be sustained; the decision was in favour of the assessee.

Ratio Decidendi: A penalty provision creating a rebuttable presumption cannot be sustained unless the statutory conditions for the presumption are shown to exist, and the assessee may rebut concealment by cogent material establishing disclosure of the turnover, not merely by proving absence of taxable turnover.

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