Best judgment sales tax assessment attracts penalty only when the statutory conditions for that assessment are truly met.

Penalty for a sales tax best judgment assessment is attracted only where the assessment is made under the provision equivalent to section 12(2), not where the account-based assessment framework is unavailable. The distinction between a true best judgment assessment and a case where correct accounts are accepted was central: section 12(2) applies when no return is filed or the return is incomplete or incorrect, while section 12(4) applies only where the dealer's accounts are found correct and assessment proceeds on that basis. As the accounts were not accepted and the assessment was made by estimate, the matter fell under section 12(2), and the penalty under section 12(5)(iii) was held unsustainable on the Revenue's footing.

---

---

Issues: Whether penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable when the assessment was a best judgment assessment under section 12(2) of the Act.

Analysis: The distinction between sections 12(2) and 12(4) was central. Section 12(2) empowers the assessing authority to make a best judgment assessment when no return is filed or when the return is incomplete or incorrect. Section 12(4) applies only where the return is incorrect or incomplete but the accounts maintained by the dealer are found to be correct and the assessment is made on the basis of those accepted accounts. Earlier decisions were applied to hold that penalty under section 12(5)(iii) is attracted only when the assessment is made to the best of judgment under section 12(2). On the facts, the accounts were not accepted, the assessment was made by estimate, and the assessment therefore fell under section 12(2), not section 12(4).

Conclusion: Penalty under section 12(5)(iii) was not sustainable on the footing adopted by the Revenue, and the question was answered in favour of the assessee.

Ratio Decidendi: Penalty under the sales tax penalty provision is attracted only where the assessment is truly a best judgment assessment under the provision corresponding to section 12(2), and not where the statutory conditions for the separate account-based assessment provision are absent.

---