Wilful non-disclosure required for sales tax penalty; reassessment alone cannot sustain penalty without mens rea finding.

Penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act cannot be imposed unless there is a specific finding of wilful non-disclosure of assessable turnover. Reassessment of escaped turnover, even where transactions were discovered on inspection, does not by itself establish the mens rea required for penalty. The record contained no finding that the assessee deliberately failed to disclose turnover, and the explanation regarding the transactions was not examined for the penalty question. On that basis, the penalty was not sustainable and the assessee succeeded.

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Issues: Whether penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959, can be sustained without a finding of wilful non-disclosure of assessable turnover.

Analysis: The material on record showed that the assessment and appellate orders proceeded mainly on the basis that the transactions came to light only on inspection and that turnover had been reassessed. There was, however, no specific finding that the assessee had deliberately and wilfully failed to disclose assessable turnover. Reassessment of escaped turnover, by itself, does not establish the requisite mens rea for penalty. The assessee had also offered an explanation that the transactions were carried out on the basis of representations made by the lessee, which was not examined in relation to the penalty issue. The legal requirement under Section 16(2) remained that there must be a finding of wilful non-disclosure to justify penalty.

Conclusion: Penalty under Section 16(2) could not be sustained in the absence of a finding of wilful non-disclosure; the assessee succeeded.

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