1984 (8) TMI 31 - HC - Income Tax

Summary

Issues involved: Application for reference of questions of law under s. 256(1) of the I.T. Act, 1961 regarding penalty under section 140A(3) levied by the ITO.

Summary:
The Commissioner of Income-tax applied to the Tribunal for referring three questions of law under s. 256(1) of the I.T. Act, 1961. The Tribunal referred only the question of whether the Tribunal was justified in holding that no penalty under section 140A(3) was leviable. An order of penalty was passed by the ITO on the ground that the assessee did not pay tax on the basis of the returned income within the due date, charging a sum of Rs. 25,000 as penalty under s. 140A(3) of the I.T. Act. The AAC upheld the order of the ITO, but the Tribunal held that the imposition of penalty for failure to perform a statutory obligation is a matter of discretion to be exercised judicially. Citing the judgment of the Supreme Court in Hindustan Steel Ltd. [1972] 83 ITR 26, the Tribunal held that the authority competent to impose penalty can refuse to impose the minimum penalty for technical or venial breaches of the Act. The Tribunal found that due to paucity of funds, the assessee could not pay the tax, and the ITO had not provided reasons for imposing the penalty. Considering the circumstances, the Tribunal held that no penalty was leviable, which was affirmed by the High Court.

The High Court found no legal infirmity in the Tribunal's order and answered the question in the affirmative and in favor of the assessee. No costs were awarded in the matter.