Bona fide taxability dispute defeats penalty where turnover was disclosed and tax was paid after the law was settled.

Penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act was unwarranted where REP licence turnover was disclosed in the total turnover but excluded from taxable turnover because its taxability was then under genuine dispute. The issue was later settled against the assessee, and the tax was paid thereafter. Applying the principle that penalty is not justified for a bona fide dispute without deliberate suppression or conscious disregard of law, the penalty was held unsustainable and deleted in favour of the assessee.

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Issues: Whether penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act was justified for non-inclusion of turnover relating to REP licences in the taxable turnover when the taxability of that turnover was then under dispute and the assessee paid the tax after the law was settled.

Analysis: The turnover relating to REP licences had been disclosed in the total turnover, but was not included in the taxable turnover because its taxability was then uncertain and pending adjudication. The issue was later settled against the assessee, and the tax was paid thereafter. On these facts, and following earlier decisions holding that no penalty lies where the omission arises from a bona fide dispute on taxability and not from deliberate suppression or conscious disregard of the law, the levy of penalty was held to be unwarranted.

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

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