Best judgment assessment defeats penalty where returns and accounts are rejected under Tamil Nadu sales tax law.

Penalty under the Tamil Nadu General Sales Tax Act was not sustainable where the assessing authority rejected the returns and accounts and completed the assessment on best judgment basis. The governing principle applied was that section 12(5) does not justify penalty merely because the returns were filed late or were defective when the assessment is not made on the returned figures under section 12(4). The court therefore upheld cancellation of the penalty in favour of the assessee.

---

---

Issues: Whether penalty under section 12(5) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained when the returns were defective, the accounts were rejected, and the assessment was made on best judgment basis.

Analysis: The assessee had not filed the returns in time, and the assessing authority rejected both the accounts and the returns before making a best judgment assessment. The governing view applied was that where the assessment is not made under section 12(4) on the basis of the returned figures but is completed after rejecting the returns and accounts, the case does not attract penalty under section 12(5). The earlier decision relied upon for this proposition had also been carried to the Supreme Court and the dismissal of the special leave petition left that view undisturbed.

Conclusion: The penalty under section 12(5) was not sustainable and was rightly cancelled in favour of the assessee.

Ratio Decidendi: Where the assessing authority rejects the return and accounts and proceeds to a best judgment assessment, penalty under section 12(5) of the Tamil Nadu General Sales Tax Act, 1959 is not justified merely because the returns were not filed in time or were defective.

---