Dishonest intention is essential for sales tax penalty where purchases were disclosed in accounts and tax was paid at assessment.

Penalty under section 43(1) of the Madhya Pradesh General Sales Tax Act, 1958 required dishonest intention. Where the assessee consistently followed the same accounting practice, had disclosed the purchases in its accounts, and the department had not earlier objected, the omission to show purchase turnover from unregistered dealers in the returns was treated as an assessment-stage practice rather than deliberate concealment. Since tax had already been paid at assessment and dishonest intent could not be inferred on these facts, the penalty was not justified and was set aside.

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Issues: Whether penalty under section 43(1) of the Madhya Pradesh General Sales Tax Act, 1958 was sustainable when the assessee did not show purchases from unregistered dealers in the returns but had disclosed them in accordance with past practice and paid the tax at assessment.

Analysis: Penalty under section 43 required dishonest intention. The assessee had consistently followed the same practice, the department had not previously objected to it, the purchases were reflected in the accounts, and a very large amount of tax had already been paid. The omission to show the purchase turnover in the returns was thus treated as part of the assessment-stage practice rather than a deliberate concealment. On these facts, dishonest intention could not be inferred.

Conclusion: Penalty under section 43(1) was not justified and was set aside in favour of the assessee.

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