Bona fide misclassification of purchases did not justify penalty where disclosure was made and intent to evade tax was unproved.

Penalty under section 76 of the West Bengal Sales Tax Act, 1994 was considered in a case where imported purchases were wrongly treated as local purchases on a bona fide belief and exemption was sought under a provision that had already been omitted. The dealer had disclosed the transactions in its accounts, had applied for exemption before the true nature of the purchases was detected, and had not collected tax on the disputed amount. The tribunal noted that tax penalty requires proof of mala fide intention to evade tax, and that the presumption of bona fide mistake was not rebutted. Penalty was therefore unsustainable and the penalty order was liable to be set aside.

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Issues: Whether penalty under section 76 of the West Bengal Sales Tax Act, 1994 was justified where the dealer treated part of the imported purchases as local purchases on the bona fide belief that they were locally purchased and sought exemption under a provision which had already been omitted.

Analysis: The dealer had disclosed the disputed purchases in its accounts and had applied for exemption before the true nature of the transaction was detected. The material showed that tax was not collected on the disputed amount and that the incorrect classification of the purchases was the result of a bona fide belief, not deliberate concealment. In tax penalty matters, the existence of a mala fide intention to evade tax must be established. On the facts found, the presumption of bona fide mistake remained unrebutted. The authorities and cited precedents on concealment or deliberate furnishing of inaccurate particulars were distinguished because the present case did not involve suppression of the transaction itself.

Conclusion: Penalty was not sustainable and the order imposing penalty was liable to be set aside.

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