Penalty for rejected exemption claim not leviable where turnover was disclosed and no mens rea was shown.

Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act was held not leviable where the disputed turnover was fully disclosed in the books and the dispute arose only from rejection of the exemption claim. The Court found no concealment or mens rea on the material before it, and accepted that a bona fide claim based on disclosed figures does not attract penalty merely because the assessment results in an addition. The amended provision and its explanation did not change the result on the facts found, so the revision on penalty failed.

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Issues: Whether penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was leviable on the assessee in the circumstances of the case, including the effect of the amended provision and the explanation thereto.

Analysis: The turnover relating to the disputed sales was disclosed in the books and the controversy arose from the rejection of the exemption claim. The assessment was not shown to rest on any concealment warranting penalty, and the material on record did not establish mens rea. The Court accepted the view that penalty under Section 12(3)(b) is not attracted merely because an exemption claim is rejected or because an addition is made, where the assessee's claim is based on disclosed figures and bona fide belief. The explanation to the provision did not alter this result on the facts found.

Conclusion: Penalty under Section 12(3)(b) was not leviable, and the revision on this issue failed.

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