Wilful suppression is required for penalty; a disclosed bona fide exemption claim cannot be penalised merely because it is rejected.

Penalty under the Tamil Nadu General Sales Tax Act was attracted only on proof of wilful non-disclosure of assessable turnover. Where the assessee had openly disclosed the sale in the bill of lading and claimed exemption on a bona fide understanding, rejection of that exemption claim did not amount to deliberate suppression or falsehood. The Madras HC therefore held that mere disallowance of a disclosed claim cannot, by itself, justify penalty, and the penalty was not exigible.

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Issues: Whether penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 was leviable when the assessee had disclosed the turnover and claimed exemption on the basis of a bona fide understanding, and whether mere disallowance of that claim could amount to wilful non-disclosure.

Analysis: Penalty under Section 16(2) is attracted only where the escape from assessment is due to wilful non-disclosure of assessable turnover. The provision is penal in nature and requires deliberate suppression or falsehood. Where the sale has been disclosed in the bill of lading and exemption is claimed openly, the mere rejection of that claim does not amount to suppression. The principle is consistent with the rule that a claim, though not accepted, cannot by itself invite penalty when all material particulars are disclosed.

Conclusion: Penalty under Section 16(2) was not exigible, and the questions of law were answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Penalty for non-disclosure can be imposed only on proof of wilful suppression or deliberate falsehood, and a bona fide exemption claim based on disclosed facts does not constitute such non-disclosure merely because it is disallowed.

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