Penalty for disclosed turnover rejected where exemption claim failed but no suppression or best judgment assessment was shown.

Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act was held inapplicable where the disputed turnover was fully reflected in the assessee's books and no suppression outside the accounts was established. The reassessment arose only because the exemption claim as second sales was rejected, not because concealed turnover was brought to tax on best judgment. Applying the settled principle that this penalty provision is attracted only in cases of best judgment assessment and not merely from rejection of an exemption claim or a difference between assessed and returned tax, the Court held that penalty was not leviable on these facts.

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Issues: Whether penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was leviable when the disputed turnover was reflected in the books of account and no suppression outside the accounts was established, notwithstanding rejection of the exemption claim as second sales.

Analysis: The disputed turnover was accepted as part of the assessee's books and the reassessment arose from rejection of the claim of exemption on the footing that the purchases were not proved to be second sales. The earlier authorities had treated the turnover as first sales and levied penalty, but the Tribunal found that the turnover was disclosed in the accounts and that the case did not involve turnover brought to tax on the basis of concealment. Applying the settled principle that penalty under Section 12(3)(b) is attracted only where the assessment is based on best judgment and not merely because an exemption claim is rejected, the Court held that the mere difference between assessed tax and tax paid does not make the penalty automatic when the turnover is already recorded in the books.

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

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