Penalty not leviable on disclosed lease rental classification dispute where two views on taxability were reasonably possible.

Penalty under the Rajasthan Value Added Tax Act was not leviable where the dispute concerned the taxability of lease rentals, the transactions were fully reflected in properly maintained books, and the assessee's classification view was plausible. The authorities treated the issue as a debatable question on which two views were reasonably possible, and held that penalty cannot follow merely because the claim was disallowed when the underlying material was disclosed. The deletion of penalty was therefore upheld in favour of the assessee.

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Issues: Whether penalty under Section 61 of the Rajasthan Value Added Tax Act, 2003 was leviable where the dispute concerned taxability of lease rentals, the transactions were duly recorded in the books of account, and the assessee's stand was supported by a plausible classification view.

Analysis: The levy of tax on lease rentals had already been accepted and had attained finality, but the surviving question was confined to penalty. The authorities found that the matter turned on classification and that two views were possible on the taxability of the receipts. The books of account were properly maintained and all transactions were disclosed. In such circumstances, and in light of the principle that penalty is not justified merely because a claim is disallowed when the underlying material is disclosed and the issue is debatable, the appellate authorities rightly deleted the penalty.

Conclusion: Penalty under Section 61 was not leviable, and the deletion of penalty was in law and in favour of the assessee.

Ratio Decidendi: Where the disputed turnover is fully disclosed in the dealer's books and the issue is one of classification on which two views are reasonably possible, penalty cannot be imposed under the sales tax penalty provision.

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