The levy of penalty under section 12(3) of the Tamil Nadu General Sales Tax Act, 1959, is not automatic whenever recourse is had to the best of judgment assessment under section 12(2). The discretion to levy a penalty must be judiciously and properly exercised, considering the facts and circumstances of each case.

DR. A. S. ANAND, C.J.

Aggrieved by the deletion of penalty levied under section12(3) of the Tamil Nadu General Sales Tax Act, 1959, hereinafter called "the Act", by the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai, the Revenue is in revision before us.

2. It is found that the place of business of the respondent-assessee was inspected by the officers of the Enforcement Owing on 22nd of November, 1979, when one pocket note book and 25 empty covers were secured from the place of business. Scrutiny of the records so recovered disclosed certain entries in the pocket note book which had not been included in the turnover to the extent of Rs. 58, 110. The assessee admitted that the amounts reflected in the note book to the extent of Rs. 58, 110 had been received by the assessee but its case was that the same were received from the buyers as premium and were not a part of the sale price. The note book had reflected different premiums collected per barrel for the period April, 1979 to 22nd of November, 1979. The assessing authority, after taking into account the entries in the pocket note book and the empty covers estimated that the amount collected by way of premium by the assessee would have worked out to Rs. 1, 47, 430. The assessing authority, therefore, rejected the returns, and finding the accounts to be incorrect, took recourse to the best judgment assessment and to the taxable turnover as per the accounts an amount of Rs. 1, 47, 430 was added on account of suppression of sales and the total and taxable turnover was thus worked out. The assessing authority also found that the omission to account for the premium receipts of Rs. 1, 47, 430 and not to disclose the same to the department was wilful and deliberate and it, therefore, proposed to levy a penalty of Rs. 19, 239 under section12(3) of the Act. Pre-assessment notice was issued and objections invited, and after hearing the parties, the assessing authority found that the addition of Rs. 1, 47, 430 was based on clear proof, and accordingly the addition was made to the taxable turnover and a penalty under section12(3) of the Act calculated at Rs. 19, 239 was levied. The assessee went up in appeal before the Appellate Assistant Commissioner. Various pleas were raised, but for the purpose of this case we are concerned with the plea relating to the addition of Rs. 1, 47, 430 on account of the alleged suppression and the levy of penalty of Rs. 19, 239.

3. The Appellate Assistant Commissioner noticed that the assessing authority had calculated the total number of barrels of sodium silicate sold by the assessee as 2, 104 and estimated the suppression at Rs. 1, 47, 430. The Appellate Assistant Commissioner also noticed that at the time of inspection, various records were recovered and the officers had verified those records and found that the amount noticed in the covers were also reflected in the pocket note book marked as "J". On the basis of the entries in the pocket note book "anamath entries" a suppression of only Rs. 58, 110 was calculated. It was found by the Appellate Assistant Commissioner that neither the Enforcement Wing Officer nor the assessing authority had gathered any material to show that the assessee had collected premium for sales, other than those which were found entered in the pocket note book. The Appellate Assistant Commissioner therefore concluded that it was not possible to presume that in all cases goods had been sold only at one rate to all the customers after receiving premium. Accordingly finding that the addition of Rs. 1, 47, 430 was based on surmises and suspicion, the Appellate Assistant Commissioner sustained the addition to the extent of Rs. 58, 110, which alone was available on the basis of the calculation of the actual amount found to have been received by the assessee from the pocket note book. Addition of Rs. 58, 110 only was held liable to tax at 8 per cent.

4. So far as the levy of penalty under section12(3) of th