Penalty for sales tax understatement fails without proof of wilful suppression where disputed turnover was disclosed in the books.

Penalty under the Tamil Nadu General Sales Tax Act was held unsustainable where the disputed turnover was reflected in the books of accounts and verified by the assessing authority. The governing principle applied was that penalty requires proof of wilful non-disclosure or deliberate suppression of assessable turnover; an incorrect or incomplete return alone does not justify penalty. As the record did not establish conscious concealment or deliberate default, the levy was set aside in substance and the assessee succeeded.

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Issues: Whether penalty under Section 12(3)(b) read with Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable when the turnover was disclosed in the books of accounts and no wilful non-disclosure was established.

Analysis: The turnover relating to the disputed transactions was reflected in the accounts and verified by the assessing authority. The levy of penalty under the Act required a finding that the escapement arose from wilful non-disclosure or deliberate suppression. The record did not support such a finding. The Court followed the settled principle that penalty is not automatic merely because a return is found to be incorrect or incomplete, and that the relevant facts must justify a conclusion of conscious concealment or wilful default. On those facts, the penalty was held to be unsustainable.

Conclusion: Penalty under Section 12(3)(b) read with Section 16(2) was not justified, and the revision was dismissed in favour of the assessee.

Final Conclusion: The levy of penalty was set aside in substance, as the disputed turnover had been disclosed in the books and the essential element of wilful non-disclosure was not proved.

Ratio Decidendi: Penalty under the Tamil Nadu General Sales Tax Act cannot be sustained unless the authority establishes wilful non-disclosure or deliberate suppression of assessable turnover; mere incompleteness of return does not by itself justify penalty when the turnover is reflected in the books of accounts.

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