Best judgment assessment requirement limits penalty under Tamil Nadu sales tax law; accepted accounts cannot sustain section 12 penalty.

Penalty under section 12(3)(b)(v) of the Tamil Nadu General Sales Tax Act, 1959 is sustainable only where the assessment is made to the best of judgment under section 12(2). A best judgment assessment applies when no return is filed in time or the return is incomplete or incorrect, and it must be estimate-based with a reasonable nexus to the material available. Where the assessing authority accepts the assessee's books and records, the assessment is not one under section 12(2). On the stated facts, the assessment was substantially based on accepted accounts, and a change in tax rate for one turnover item did not alter its character; the penalty was therefore not leviable and the penalty order was set aside.

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Issues: Whether penalty under section 12(3)(b)(v) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained when the assessment was made on the basis of the assessee's books of account and not as a best judgment assessment under section 12(2).

Analysis: Penalty under section 12(3) is attracted only when an assessment is made under section 12(2). Section 12(2) contemplates best judgment assessment where no return is filed within time or the return appears incomplete or incorrect. The governing principle is that a best judgment assessment is estimate-based and must have a reasonable nexus with the available material; where the books of account and connected records are accepted, there is no basis for best judgment assessment. On the facts, the assessment was substantially made on the accepted accounts, and the alteration of tax rate on a particular turnover item did not convert the assessment into one under section 12(2).

Conclusion: Penalty was not leviable under section 12(3)(b)(v), and the impugned order upholding the penalty could not stand.

Final Conclusion: The writ petition succeeded and the penalty order was set aside on the ground that the assessment was not a best judgment assessment.

Ratio Decidendi: Penalty under section 12(3) of the Tamil Nadu General Sales Tax Act, 1959 can be imposed only when the assessment is made to the best of judgment under section 12(2), and not where the assessment is based on accepted accounts.

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