Genuine declaration forms required for sales tax deduction; bogus transactions also justify penalty under the Punjab sales tax law.

Deduction against ST-XXII declaration forms under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948 was held to depend on genuine, provable sales to actual purchasing dealers; where the assessee could not produce sale and purchase bills, the buyers were untraceable or fictitious, and signatures and records did not match, the deduction was disallowed. On the same factual findings, incorrect returns and a bogus deduction claim justified penalty under section 10(7), so the penal action was sustained. The reference was answered against the assessee.

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Issues: (i) Whether sales made against ST-XXII forms to seven registered purchasing dealers were entitled to deduction under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948. (ii) Whether penalty was leviable under section 10(7) of the Punjab General Sales Tax Act, 1948.

Issue (i): Whether sales made against ST-XXII forms to seven registered purchasing dealers were entitled to deduction under section 5(2)(a)(ii) of the Punjab General Sales Tax Act, 1948.

Analysis: Deduction under section 5(2)(a)(ii) is available only where the declaration forms are issued by genuine buyers in respect of actual transactions. The authenticity of the ST-XXII forms and the underlying sales was doubted. The assessee failed to produce the sale and purchase bills, and the surrounding record did not establish to whom the goods were delivered or whether the transactions were in fact completed. The signatures on the registration documents and the declaration forms did not tally, and the alleged buyers were either not traceable, denied the sales, or were shown to be fictitious. In these circumstances, the requirement of cross-examination did not assist the assessee.

Conclusion: The claim for deduction under section 5(2)(a)(ii) was rightly disallowed, against the assessee and in favour of the Revenue.

Issue (ii): Whether penalty was leviable under section 10(7) of the Punjab General Sales Tax Act, 1948.

Analysis: Once the sales were found to be unsupported by genuine evidence and the declarations were held to be invalid, the filing of incorrect returns and the bogus claim for deduction justified penal action. The factual findings established that the transactions were not genuine and that the assessee had attempted to evade tax through false declarations.

Conclusion: Penalty under section 10(7) was rightly levied, against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered wholly against the assessee, with both the disallowance of deduction and the penalty sustained on the basis that the claimed sales were not proved to be genuine.

Ratio Decidendi: Deduction against statutory declaration forms is permissible only when the forms support genuine and provable sales transactions, and penalty follows where the claim is found to be bogus or unsupported by reliable evidence.

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