Penalty for incorrect returns upheld, but quantum reduced after mitigating factors and revised returns were considered

Penalty under section 45-A of the Kerala General Sales Tax Act was upheld because filing untrue or incorrect returns and a conscious attempt to evade tax justified levy. However, the quantum had to be fixed by judicious discretion having regard to surrounding circumstances, and the filing of revised returns before verification and detection, together with entries in the books of account, were mitigating factors. The period of non-payment and the tax involved were also relevant in reworking the amount. Interference with the levy was not warranted, but the penalty was reduced for the two assessment years.

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Issues: Whether the penalty imposed for filing incorrect returns under section 45-A of the Kerala General Sales Tax Act, 1963 required interference, and whether the quantum of penalty warranted reduction.

Analysis: Penalty under section 45-A is attracted for submission of untrue or incorrect returns, and the quantum is to be fixed by the exercise of judicious discretion having regard to the surrounding circumstances. A finding of contumacious conduct and conscious attempt to evade tax justified the imposition of penalty, but the circumstance that revised returns were filed before verification and detection of omission, together with the fact that the transactions were entered in the books of account, constituted mitigating factors relevant to the amount of penalty. The period for which tax remained unpaid and the tax involved were also taken into account in reworking the penal amount.

Conclusion: Interference on the levy of penalty was not warranted, but the penalty was reduced to Rs. 35,000 and Rs. 40,000 for the two assessment years respectively.

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