Penalty for tax evasion requires conscious concealment; a bona fide taxability dispute and recorded sales are insufficient.

Penalty under section 65 of the Rajasthan Sales Tax Act, 1994 requires proof of conscious concealment, deliberate furnishing of inaccurate particulars, or other guilty intent to evade tax. Where canteen sales were recorded in the regular books, tax and interest were paid after notice, and the dispute concerned only the assessee's bona fide belief that the activity was not taxable, penalty could not be sustained. The rejection of the assessee's taxability argument did not, by itself, establish mens rea or mala fide intention. The absence of any penalty under the registration default provision also supported the conclusion that no deliberate evasion was proved.

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Issues: Whether penalty under section 65 of the Rajasthan Sales Tax Act, 1994 could be imposed for non-payment of tax on canteen sales where the transactions were recorded in the books, registration was obtained retrospectively after notice, and the assessee asserted a bona fide belief that the activity was not taxable.

Analysis: Penalty under section 65 is attracted only when the dealer has consciously concealed particulars, deliberately furnished inaccurate particulars, or otherwise evaded tax with a guilty intent. The transactions were duly recorded in the regular books of account, tax and interest were paid after notice, and the case was not one of concealment of turnover or false return. The mere fact that the assessee's legal contention on taxability was rejected did not, by itself, establish mens rea or mala fide intention. Section 59, which specifically dealt with penalty for failure to apply for registration, was also not invoked against the assessee, which reinforced the absence of a penal finding for deliberate default. Penalty was therefore held to be not automatic and could not be sustained on these facts.

Conclusion: Penalty under section 65 was not leviable against the assessee.

Ratio Decidendi: A penalty for avoidance or evasion of tax cannot be imposed unless the revenue proves conscious concealment or deliberate evasion; a bona fide dispute on taxability, by itself, does not justify penalty.

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