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Judgment
Ramanujam, J.—The question that arises in this tax case is as to whether the penalty u/s 12(5) of the Tamil Nadu General Sales Tax Act,
1959, could be levied on the basis that the assessment is u/s 12(4) of the Act. In this case, the assessee submitted a return, but the assessing
authority found the return to be incorrect and incomplete and proceeded to make a best judgment assessment after ignoring the turnover as
disclosed in the books. The question is whether the assessment in this case could be said to have been made u/s 12(4) in which case alone the
penalty u/s 12(5) could be levied. Section 12(4) enables the assessing authority to assess a dealer on the basis of his accounts if such dealer (i) has
failed to submit the prescribed return; or (ii) has failed to submit the prescribed return within the prescribed time; or (iii) if the return submitted is
found to be incomplete or incorrect. Admittedly, in this case, the assessing authority not only rejected the return filed by the assessee as incorrect
and incomplete but also rejected the accounts of the assessee and proceeded to make a best judgment assessment. Admittedly, the best judgment
assessment is not on the basis of the book entries. Therefore, the assessment cannot be said to have been made under sub-section (4) of section
The penalty u/s 12(5) can be levied only if the assessment is made under sub-section (4) of section 12, that is, when the assessment is made on
the basis of the entries found in the books of account of the assessee, and not when the assessment is made dehors the accounts and after rejecting
the same. Thus, the Tribunal in this case appears to be right in holding that the penalty u/s 12(5) cannot be justified on the facts of the case. The tax
case is, therefore, dismissed.