Bona fide disclosure of turnover defeats sales tax penalty where the assessee did not suppress taxable transactions.

Penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act was held unsustainable where the disputed turnover had been recorded in the books and disclosed in the return under the exemption column. The court treated the disclosure as inconsistent with suppression, especially because the assessee had earlier contested tax liability and later paid tax only after that challenge failed. Bona fide belief that the turnover was not taxable was given weight, and the levy of penalty was set aside.

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Issues: Whether penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable when the disputed turnover was disclosed in the return under the exemption column and the assessee acted under a bona fide belief that the turnover was not taxable.

Analysis: The turnover on which penalty was levied was found to have been entered in the books and shown in the return under the exemption column. The assessee had also challenged the liability earlier and paid tax after the challenge failed. In these circumstances, the disclosure could not be treated as suppression of turnover warranting penalty, and the bona fide nature of the claim had to be given due weight while considering the levy.

Conclusion: Penalty was not justified and the levy was set aside in favour of the assessee.

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