Penalty for false returns fails absent guilty intention where minor discrepancies and delay weakened the tax authority's case.

Penalty for alleged false returns and turnover discrepancies under the M.P. General Sales Tax Act, 1958 was held unsustainable where the account variations were minor, proceedings were initiated after a long delay, and the record did not show any intent to evade tax or furnish false returns. Mere untenable claims for deduction as tax-free sales did not, by themselves, establish falsity. As the sales related to waste and obsolete materials and guilty intention was not proved, the statutory foundation for penalty was absent and the penalties were set aside.

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Issues: Whether penalties imposed for alleged false returns and turnover discrepancies under the M.P. General Sales Tax Act, 1958 were sustainable in the absence of evidence of guilty intention.

Analysis: The discrepancies between the accounts and the returns were found to be minor, and the penalty proceedings were initiated after a long lapse of time, which affected the assessee's ability to explain the entries. The mere making of untenable claims for deduction as tax-free sales did not, by itself, establish that the returns were false. On the facts, the sales in question related to waste and obsolete materials, and the material on record did not show any intention to evade tax or furnish false returns. In the absence of evidence of guilty intention, the statutory basis for penalty was not made out.

Conclusion: The penalties were unsustainable and were set aside in favour of the assessee.

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