Penalty for breach of trade tax transit rules requires a clear finding of intention to evade tax.

Penalty for breach of section 28A of the U.P. Trade Tax Act could not be sustained unless the authority recorded a clear finding of intention to evade tax. The Court rejected the view that mens rea was unnecessary under section 15A(1)(o), and held that the assessee's exempt status, acceptance of books, and absence of any finding of tax evasion defeated the penalty. The blank transport form was treated as a procedural lapse only, not a sufficient basis by itself to impose penalty. The penalty was deleted and the revision was allowed.

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Issues: Whether penalty under section 15A(1)(o) of the U.P. Trade Tax Act, 1948 for breach of section 28A could be sustained without a clear finding that the assessee intended to evade tax.

Analysis: The Tribunal had proceeded on the footing that proof of mens rea was unnecessary for penalty under section 15A(1)(o). The Court held that, for imposing penalty for violation of section 28A, the authority must record a clear finding that there was an intention to evade tax. On the facts, the assessee was a duly exempted unit, its final product was exempt, the books of account had been accepted, and no finding of tax evasion had been returned. Although the transport form was blank and that amounted to non-compliance with the procedural requirement, the omission was treated as a procedural lapse and not as a sufficient basis, by itself, to sustain the penalty.

Conclusion: Penalty under section 15A(1)(o) was not sustainable in the absence of a finding of intention to evade tax and was deleted; the revision was allowed.

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