Wilful non-disclosure of assessable turnover is a necessary ingredient to attract the levy of penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act.

1. The assessee is on revisions as against the order of the Tribunal. The above revisions are admitted on the following common questions of law:-

(i) Whether for imposition of penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959, a finding of wilful non disclosure is necessary?

(ii) Whether, when the petitioners had completely disclosed their turnover pertaining to the transaction with Alsa, but only claimed deduction, the petitioners could be stated to have not disclosed their turnover within the meaning of Section 16(2) of the Tamil Nadu General Sales Tax At, 1959?"

2. The assessment years under consideration are 1994-95, 1995-96 and 1996-97 respectively. The petitioner is a company engaged in the hire purchase and leasing. During the assessment years under consideration, the petitioner herein leased out centering sheets to M/s. Also Investments Limited. In respect of all lease transactions, originally, the petitioner's claim for deduction under Section 3-A(2)(b) of the Tamil Nadu General Sales Tax Act, 1959, was allowed, thereby, the taxable turnover was shown as NIL. On 10.3.1998, there was an inspection in the petitioner's premises. At that time, the petitioner was informed that the sellers from whom the petitioner had purchased the centering sheets were fictitious persons. Consequently, the claim for exemption was not maintainable under the provisions of Section 3-A(2)(b) of the Act. In terms of the materials thus recovered, a notice of revision was issued under Section 16 of the Act. In respect of above said assessment years, the petitioner filed his objection contending that their leasing business for the past years had been carried on in the following manner viz., Customers interested in entering into a leasing transaction with the assessee has to approach the assesse after identifying a prospective seller. The customer would prepare a proposal form indicating the name of the proposed supplier from whom the petitioner would be required to effect purchase of the goods for the prospective lessee. The proforma from the intended supplier would reveal description of the supplier, apart from the details of the goods proposed to be supplied, including the price at which it was going to be supplied at. Thereupon, the assessee would verify the financial capacity of the proposed lessee. Then they would enter into a lease agreement. Lease agreement contained the clause regarding the lessee having the sole responsibility for taking delivery and possession of the equipment leased in the agreement, the responsibility of packing, loading, incurring freight, transporting the goods, lease and unloading the same at the premises of the lessee. Except for stating that the ownership vested with the assessee herein, the lease agreement clearly imposes various obligations, which pointed out that the petitioner would never directly or indirectly interact with the seller identified by the lessee. The delivery challans were handed over to the assessee by the representative of the lessee and the sale invoice

would be raised on the assessee by the seller. The covering letters addressed to the suppliers mentioned the name of "M/s.Alsa Investments Private Limited", to whom cheques are issued. The representative of the lessee would thereafter collect the sale price from the assessee. As and when the cheques were honoured and the sale price realised, the acknowledgment of the receipt of the sale price would be handed over to the petitioner by the representative of the lessee. Thus, the assessee submitted that at no point of time, they had interacted with the supplier but the assessee had acted solely on the basis of the representation by the lessees. In the circumstances, the petitioner submitted that they were shocked to receive the notice informing about the nonexistence of the suppliers. Immediately thereon, the petitioner communicated with the lessee and sought for proof of the existence of sellers. In the meanw