Bona fide omission in return bars penalty where taxability was unsettled and no incorrect return was established.

Penalty for an incorrect or incomplete return was held inapplicable where the assessee omitted turnover from REP/Exim scrip sales before the taxability of such sales had been settled, and the omission was based on a bona fide belief that the turnover was not taxable. The statutory basis for penalty under the Tamil Nadu General Sales Tax Act was therefore not established. The appellate Tribunal's order setting aside the penalty direction was sustained, and the revision failed.

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Issues: Whether penalty could be levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 for non-disclosure of turnover relating to sale of REP/Exim scrips for an assessment year when the taxability of such sale was not yet settled.

Analysis: Penalty under Section 12(5)(iii) is attracted where the return submitted is found to be incorrect or incomplete. On the facts, the assessee's return was filed before the legal position on the taxability of REP/Exim scrips had been settled, and the non-disclosure was found to rest on a bona fide belief that the turnover was not taxable. In such circumstances, the statutory basis for penalty was not made out.

Conclusion: Penalty was not leviable, and the assessee was entitled to succeed.

Final Conclusion: The revision failed, and the order of the appellate Tribunal setting aside the penalty direction was sustained.

Ratio Decidendi: Penalty for filing an incorrect or incomplete return cannot be imposed when the omission occurred before the relevant tax position was settled and the dealer acted under a bona fide belief.

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