Bona fide belief can defeat penalty for non-disclosure of turnover where taxability was genuinely disputed.

Penalty for non-disclosure of turnover is not to be imposed mechanically where the assessee explains the omission on a bona fide belief that the sales were not taxable. The Madras High Court noted that, even if deliberate concealment is not a strict prerequisite under the penalty provision, the assessee's bona fides remain a relevant factor. Because the Tribunal accepted the explanation that turnover from sale of REP licences and exim scrips was omitted under a genuine belief of non-taxability, its deletion of penalty was upheld and the penalty was held unsustainable.

---

---

Issues: Whether penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 could be sustained for non-disclosure of turnover from sale of REP licences and exim scrips when the assessee claimed to have acted under a bona fide belief that such sales were not exigible to tax.

Analysis: The levy of penalty for non-disclosure of turnover is not to be examined in a purely mechanical manner. Even where deliberate or wilful concealment is not shown to be a strict prerequisite under section 12(5), the bona fides of the assessee remain a relevant consideration before penalty is imposed. The Court noted that the assessee's explanation was that the turnover was omitted because of a bona fide belief regarding taxability of REP licences and exim scrips, and that the Tribunal had accepted this explanation while deleting the penalty. In the light of the earlier decision recognising that bona fide belief is relevant in penalty matters of this nature, the Tribunal's approach was held to be correct.

Conclusion: The penalty was not sustainable and the deletion of penalty by the Tribunal was upheld in favour of the assessee.

Ratio Decidendi: For penalty under section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959, bona fide belief regarding non-taxability is a relevant factor, and penalty for non-disclosure should not be sustained where such bona fides are established.

---