Penalty for incorrect import-sale treatment rejected where the legal position remained unsettled and disclosure followed then-existing Supreme Court law.

Penalty under Section 36(2)(c) of the Bombay Sales Tax Act, 1959 was held inapplicable where the assessee disclosed turnover as sales in the course of import on the basis of an existing Supreme Court view. The court noted that the legal position on the character of such sales was still evolving and had not been finally settled by later decisions during the relevant period. On those facts, the incorrect claim was not treated as concealment, deliberate furnishing of inaccurate particulars, or gross or wilful neglect, so the penalty provision was not attracted.

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Issues: Whether penalty under Section 36(2)(c) of the Bombay Sales Tax Act, 1959 was justified when the assessee treated the turnover as sales in the course of import on the basis of an existing Supreme Court decision and the legal position was not finally settled.

Analysis: The turnover had been disclosed as sales in the course of import on the strength of the then prevailing view of law reflected in the earlier Supreme Court ruling. During the relevant period that view had not been displaced by subsequent decisions, and the legal position on the character of such sales was still evolving. In these circumstances, the incorrect claim could not be treated as concealment, deliberate furnishing of inaccurate particulars, or gross or wilful neglect attracting penalty.

Conclusion: The penalty provision was not attracted and the finding went in favour of the assessee.

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