Penalty for alleged non-recording in books cannot rest on seizure alone without reliable contemporaneous verification of the transaction.

Penalty under section 13-A(4) of the U.P. Trade Tax Act could not be sustained on seizure of goods alone. The High Court held that, where the relevant sale had been disclosed in the monthly return and no contemporaneous survey, inspection, search, or verification was conducted, there was no reliable material to prove that the transaction was omitted from the books with intent to evade tax. The authorities also failed to address the plea that the invoice was covered by an exemption notification. On that basis, the penalty order and appellate affirmation were set aside.

---

---

Issues: (i) Whether penalty under section 13-A(4) of the U.P. Trade Tax Act, 1948 could be sustained merely on the basis of seizure of goods and an inferred omission in the books of account; (ii) whether the findings of the authorities below could stand when the disclosure in the monthly return and absence of any contemporaneous survey or inspection were not considered.

Issue (i): Whether penalty under section 13-A(4) of the U.P. Trade Tax Act, 1948 could be sustained merely on the basis of seizure of goods and an inferred omission in the books of account.

Analysis: Penalty proceedings required a definite basis to show that the transaction had not been duly recorded with an intention to evade tax. The record showed that the relevant sale was disclosed in the monthly return, and no material was brought on record to show that, immediately after seizure, any survey, inspection, search, or verification was conducted at the business premises to test the genuineness of the transaction or the books of account. Seizure alone was held insufficient to justify an inference that entries were absent in the books.

Conclusion: The penalty could not be sustained on the basis of seizure and inference alone, and the issue was decided in favour of the revisionist.

Issue (ii): Whether the findings of the authorities below could stand when the disclosure in the monthly return and absence of any contemporaneous survey or inspection were not considered.

Analysis: The authorities below failed to deal with the specific plea that the invoice had already been disclosed in the monthly sales return and that the goods were claimed to be covered by an exemption notification. The absence of any inspection or survey after seizure meant that the adverse conclusion drawn by the authorities lacked supporting material, rendering the finding unsustainable and perverse.

Conclusion: The findings of the authorities below could not be sustained, and the issue was decided in favour of the revisionist.

Final Conclusion: The penalty order and the appellate affirmation were set aside, and the revision succeeded on the ground that the alleged non-recording in the books of account was not proved by reliable material.

Ratio Decidendi: A penalty for alleged non-recording of a transaction cannot be upheld on seizure alone unless the authority establishes, on reliable contemporaneous material, that the transaction was not entered in the books of account with an intention to evade tax.

---