Wilful suppression penalty cannot stand where transfer sales were recorded in books and omitted from returns under bona fide belief.

Penalty for wilful suppression was held unsustainable where the disputed transfer sales were fully recorded in the books and had been examined in the original assessment. The later treatment of those transactions as sales did not, by itself, establish deliberate concealment. The decisive factor was that the omission from monthly returns was not shown to be intentional and was consistent with a bona fide view that the transactions were not taxable sales. On those facts, the penalty claim failed and the issue was resolved in favour of the assessees.

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Issues: Whether penalty could be levied for non-reporting of transfer sales reflected in the books of account on the ground of wilful suppression of turnover.

Analysis: The transfer transactions were entered in the assessees' accounts and had been examined during the original assessment. The revised assessment treated those transactions as sales, but the only surviving dispute was as to penalty. The relevant consideration was whether the assessees' omission from monthly returns was deliberate or whether it stemmed from a bona fide view that the transactions were not taxable sales. In the circumstances, and in the light of the prior assessment treatment and the recorded nature of the transactions, the omission was not shown to be wilful suppression. Penalty was therefore not justified.

Conclusion: The issue was decided in favour of the assessees; the levy of penalty was unsustainable.

Ratio Decidendi: Where the disputed transactions are fully reflected in the books and the assessee omits them from returns under a bona fide belief that they are not taxable, penalty for wilful suppression cannot be sustained in the absence of deliberate concealment.

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