Best judgment assessment requirement defeats penalty where additions were confined to gross profit and freight.

Penalty under the Tamil Nadu General Sales Tax Act was held unsustainable where the assessment was not based on suppressed turnover or undisclosed sales, but only on additions to gross profit and freight. The Court treated penalty under Section 12(3)(b) as dependent on a true best judgment assessment, and found that the assessment records did not show the kind of rejection of books needed to attract the provision. On that basis, deletion of the penalty was upheld and the revision was found to lack merit.

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Issues: Whether penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, was leviable for the assessment year 1993-1994 when the assessment was not founded on suppressed turnover but only on an addition towards gross profit and freight.

Analysis: The assessment records showed that the turnover was not rejected on the basis of any suppressed sales or purchases outside the books. The addition was confined to gross profit and freight, and the Court noted that the levy of penalty under the amended provision had to be tested in the light of whether the assessment was truly a best judgment assessment. The Court relied on the principle that penalty under the provision is attracted only where the assessment is made to the best of judgment.

Conclusion: Penalty under Section 12(3)(b) was not justified on the facts, and the deletion of penalty was upheld in favour of the assessee.

Final Conclusion: The revision was found to be without merit and the Tribunal's order deleting the penalty was sustained.

Ratio Decidendi: Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959, can be sustained only where the assessment is in substance a best judgment assessment.

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