Bona fide exemption claim defeats penalty for incorrect return where full turnover was disclosed and no deliberate falsity was shown.

Penalty under section 45A(1)(d) of the Kerala General Sales Tax Act could not be sustained where the assessee disclosed the full turnover and claimed exemption on wheat products under a bona fide understanding of the tax position. The record did not show a knowingly false or intentionally incorrect return, or any deliberate suppression. In the absence of proof of mens rea or deliberate falsity, the statutory basis for penal action for an untrue or incorrect return was not made out, and the defect, if any, was only technical or venial. The penalty orders were therefore set aside.

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Issues: Whether penalty under section 45A(1)(d) of the Kerala General Sales Tax Act was leviable for filing a return claiming exemption on the turnover of wheat products on the basis of the assessee's belief that the goods were not liable to further tax.

Analysis: The return disclosed the entire turnover and the claim of exemption was founded on the then-prevailing understanding of the tax position. The material on record did not show that the return was knowingly false or intentionally incorrect. In the circumstances, the statutory basis for invoking penal action for an untrue or incorrect return was absent, and the defect, if any, was only technical or venial.

Conclusion: The penalty was not exigible and the assessee was entitled to relief.

Final Conclusion: The penalty orders were set aside and the writ appeal succeeded.

Ratio Decidendi: Penalty for an untrue or incorrect return cannot be sustained when the return is fully disclosed and the disputed claim is made under a bona fide legal belief, absent proof of knowing falsity or deliberate suppression.

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