Penalty for disclosed turnover items not automatic when assessee relied on then-prevailing law and acted bona fide.

Penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act was not leviable where the assessee filed the return in time, disclosed freight and packing charges in the total turnover, and excluded them from taxable turnover on the basis of the law then prevailing. The provision is discretionary and does not operate automatically merely because the assessment is later found unsustainable after a change in legal position. Penalty is attracted only where there is failure to file a return, belated filing, or an incorrect or incomplete return, and the authority must consider deliberate or intentional evasion, bona fides, and uncertainty in the law. The deletion of penalty was therefore upheld.

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Issues: Whether penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was leviable for the assessee's return relating to assessment year 1981-82, where freight and packing charges were disclosed in the total turnover but excluded from taxable turnover on the basis of then-prevailing law.

Analysis: The return was filed in time and the disputed freight and packing charges were not concealed; they were shown in the total turnover and excluded from taxable turnover on the footing of a binding decision of the High Court then holding the field. Penalty under Section 12(4) arises only when there is failure to file a return, belated filing, or filing of an incorrect or incomplete return. Even where the assessment later becomes unsustainable after reversal of the earlier legal position, penalty is not automatic. The power under Section 12(5)(iii) is discretionary and must be exercised after considering whether the assessee acted deliberately or intentionally to evade tax, including the assessee's bona fides and the uncertainty in the law at the relevant time.

Conclusion: Penalty was not leviable; the assessee's conduct was bona fide and the Tribunal was right in deleting the penalty.

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