Rebuttable penalty presumption under sales tax law cannot stand without proof of concealment or wilful neglect.

Penalty under section 36(2)(c) of the Bombay Sales Tax Act depends on a rebuttable statutory presumption, but the Revenue still bears the burden of establishing concealment or furnishing of inaccurate particulars. Where the assessee produces books of account that are accepted and no suppression is shown, the presumption can be displaced on the facts, including evidence of financial distress or sick-unit status. Applying the scheme explained in Indoswe Engineers, penalty cannot be sustained unless gross or wilful neglect is established on the material on record. The Tribunal's deletion of penalty was therefore justified and was sustained in favour of the assessee.

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Issues: (i) Whether, on the facts and circumstances of the case, the onus under Explanation I to section 36(2)(c) of the Bombay Sales Tax Act, 1959 lay on the Revenue to establish gross or wilful neglect on the part of the assessee. (ii) Whether the Tribunal was correct in deleting the penalty levied under section 36(2)(c) read with Explanation I of the Bombay Sales Tax Act, 1959 in view of the decision in Indoswe Engineers.

Issue (i): Whether, on the facts and circumstances of the case, the onus under Explanation I to section 36(2)(c) of the Bombay Sales Tax Act, 1959 lay on the Revenue to establish gross or wilful neglect on the part of the assessee.

Analysis: Explanation I creates a rebuttable presumption where the tax paid with returns is less than eighty per cent of the assessed tax, but the burden under the penalty provision remains on the Revenue to establish concealment or furnishing of inaccurate particulars. The presumption can be displaced by cogent material, and in the present facts the books of account were produced, accepted, and not shown to disclose any suppression. The lesser tax payment was also linked to the assessee's financial distress and sick-unit status, which negatived any inference of wilful neglect.

Conclusion: The onus was not treated as having been wrongly shifted to the Revenue in a manner adverse to the assessee, and the factual basis for alleging gross or wilful neglect was not made out.

Issue (ii): Whether the Tribunal was correct in deleting the penalty levied under section 36(2)(c) read with Explanation I of the Bombay Sales Tax Act, 1959 in view of the decision in Indoswe Engineers.

Analysis: The earlier decision in Indoswe Engineers was treated as laying down the scheme of penalty under section 36(2)(c), including the nature of the statutory presumptions and the standard for rebuttal. Penalty provisions were required to be construed strictly, and the material on record did not justify sustaining penalty where the assessee had rebutted the presumption and no concealment was established. The Tribunal's reliance on that principle was therefore justified.

Conclusion: The Tribunal was correct in deleting the penalty.

Final Conclusion: The reference was answered in favour of the assessee, and the deletion of penalty under section 36(2)(c) read with Explanation I was sustained.

Ratio Decidendi: In penalty proceedings under section 36(2)(c), the statutory presumption under the explanations is rebuttable, the Revenue must still establish the ingredients of concealment or inaccurate particulars, and penalty cannot be sustained where the assessee rebuts the presumption on a preponderance of probabilities.

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