Penalty under sales tax law requires an incorrect or incomplete return, not merely rejection of the assessee's taxability claim.

Penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 is attracted only when the return is found to be incorrect or incomplete. Where the assessment order accepts the dealer's accounts and merely rejects the dealer's legal contention on taxability, the statutory precondition for penalty is not satisfied. On those facts, the Tribunal was justified in deleting the penalty, and the levy could not be sustained.

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Issues: Whether penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained when the assessment order did not record that the return furnished was incorrect or incomplete.

Analysis: Penalty under section 12(3)(b) is attracted only where the dealer has submitted an incorrect or incomplete return. The assessment order did not state that the account particulars furnished by the dealer were incorrect or incomplete. Instead, assessment was made by accepting the accounts and rejecting the dealer's legal contention on taxability. In such circumstances, the statutory precondition for levy of penalty was absent, and the Tribunal was justified in deleting the penalty.

Conclusion: The penalty under section 12(3)(b) was not sustainable and the revision failed.

Ratio Decidendi: Penalty under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 can be imposed only when the return is found to be incorrect or incomplete, and not merely because the assessee's claim on taxability is rejected.

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