Wilful suppression required for sales tax penalty; adverse assessment alone cannot justify levy without clear non-disclosure finding.

Wilful suppression or wilful non-disclosure is required to sustain penalty in a sales tax matter; a mere adverse assessment or rejection of the assessee's explanation is insufficient. The Tribunal upheld suppression for assessment purposes after examining the recovered books and treating the issue largely as one of fact, while accepting some explanations and deleting part of the alleged suppression. Penalty under section 12(3) was nevertheless unsustainable because there was no clear finding of wilful suppression meeting the higher threshold for levy. The finding of suppression remained undisturbed, but the penalty was deleted.

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Issues: (i) Whether the Tribunal was right in upholding a finding of suppression on the basis of the recovered books B, C and D; (ii) whether penalty could be sustained in the absence of a finding of wilful suppression.

Issue (i): Whether the Tribunal was right in upholding a finding of suppression on the basis of the recovered books B, C and D.

Analysis: The recovered records were examined by the Tribunal page by page. It accepted part of the assessee's explanation, including the omission to carry forward the previous day's stock in one of the registers, and deleted a portion of the alleged suppression. The Tribunal also granted relief with reference to the slips and accepted that the stock variation was negligible in relation to the total stock. On the remaining material, however, it was not persuaded to accept the explanation in full and treated the issue as one of fact based on appreciation of the records.

Conclusion: The finding of suppression was upheld and the issue was answered against the assessee.

Issue (ii): Whether penalty could be sustained in the absence of a finding of wilful suppression.

Analysis: Penalty under section 12(3) depended on wilful non-disclosure and not merely on the existence of discrepancies or an adverse assessment. The explanation offered by the assessee for the entries in the recovered books was not wholly accepted, but the Tribunal itself had accepted parts of it and had deleted substantial additions. Mere non-acceptance of the explanation or an inference that goods might have been disposed of out of books was held insufficient to meet the higher standard required for penalty. The levy of penalty was therefore not automatic and required a clear finding of wilful suppression.

Conclusion: Penalty was not justified and was set aside in favour of the assessee.

Final Conclusion: The revision succeeded only to the extent of deletion of penalty, while the finding of suppression for assessment purposes was left undisturbed.

Ratio Decidendi: For levy of penalty in a sales tax matter, there must be a clear finding of wilful suppression or wilful non-disclosure; a mere adverse assessment or rejection of explanation does not by itself justify penalty.

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