Penalty for estimated turnover based on books and stock variation not sustainable without proof of wilful suppression.

Penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act was held unsustainable where the turnover was estimated from the assessee's books and stock variation, without evidence of specific off-book sales or incriminating material. The governing principle applied was that penalty for an incorrect or incomplete return requires material showing real suppression or wilful non-disclosure, not a mere addition based on estimation or stock discrepancy. On that basis, the Tribunal's deletion of penalty was upheld while the assessed turnover as modified remained undisturbed.

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Issues: Whether penalty under Section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959 was sustainable when the turnover was estimated from the assessee's books and stock variation, and whether the Tribunal was right in deleting the penalty while sustaining the assessed turnover.

Analysis: The assessment for the relevant years was founded on inspection-based stock variation and figures drawn from the assessee's own accounts, without detection of any specific off-book transaction or incriminating record. The Court noted that, under the governing law, penalty under Section 12(3)(b) is attracted only where the assessment is based on best judgment on material showing a real suppression or incomplete or incorrect return, and not merely because an estimate or discrepancy in stock leads to an addition. Since the turnover confirmed was derived from the books and the circumstances did not establish wilful suppression beyond the accounts, the penal provision could not be invoked automatically.

Conclusion: The deletion of penalty was upheld and the revision failed.

Final Conclusion: The Tribunal's order was affirmed, and the assessee retained relief from penalty while the assessed turnover stood as modified.

Ratio Decidendi: Penalty for incorrect or incomplete return under Section 12(3)(b) cannot be sustained where the addition is founded on books of account and stock estimation without proof of specific suppression or wilful non-disclosure.

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