Best judgment assessment and penalty follow where taxable sales are misdescribed and their true character is suppressed.

A return is incorrect for best judgment assessment when it misdescribes taxable sales or suppresses their true character, even if later turnover figures align with the books. Here, inspection and verification showed that the books and return did not disclose the true state of affairs, revised returns were filed after inspection, and the taxable turnover changed during proceedings. The Court treated the assessment as one made under section 12(3) of the Karnataka Sales Tax Act, 1957, and held that suppression and wrong exemption claims justified penalty under section 12(4). The Tribunal's contrary finding was set aside and the assessment and penalty were restored.

---

---

Issues: Whether the assessment made under section 12(3) of the Karnataka Sales Tax Act, 1957 was a best judgment assessment on account of incorrect and incomplete returns, and whether penalty under section 12(4) was therefore leviable.

Analysis: The return particulars and the books of account did not reveal the true state of affairs until inspection and verification of the intelligence material. The assessee had filed revised returns after the premises were inspected and the taxable turnover disclosed in the course of proceedings changed from time to time. The Court held that misdescription of sales and wrong claim of exemption concealed the actual taxable turnover, and that a return may be incorrect even where the aggregate figures later correspond with the books, if the underlying classification and disclosure of sales are false. On those facts, the assessment was treated as one made to the best of the assessing authority's judgment, and the element of suppression justified penalty.

Conclusion: The assessment fell within section 12(3), and penalty under section 12(4) was sustainable; the finding of the Tribunal was set aside in favour of the Revenue.

Final Conclusion: The revision succeeded, the Tribunal's order was overturned, and the assessment and penalty made by the first appellate authority stood restored.

Ratio Decidendi: A return is incorrect for the purpose of best judgment assessment when it wrongly describes taxable sales or suppresses their true character, and such suppression can sustain penalty even if the overall turnover figures later match the books of account.

---