Income-tax Officers do not initiate penalty proceedings under section 271(1)(a) of the Income-tax Act, 1961 in a number of cases, by exercising their discretion - Income Tax - 583/CBDT

INSTRUCTION NO. 583/CBDT Dated : August 9, 1973 Section(s) Referred: 271(1)(a) Statute: Income - Tax Act, 1961 Income-tax Officers do not initiate penalty proceedings under section 271(1)(a) of the Income-tax Act, 1961 in a number of cases, by exercising their discretion depending upon the facts and circumstances of each case. While doing so, it is found that the Income-tax Officers do not generally record their reasons for non-initiation of penalty proceedings under this section. The Board's circular F.No.58/2/63-IT, dated the 1st October, 1963 and F.No.81/114/68-IT(B), dated the 25th November, 1968 give certain circumstances under which there is no need to initiate penalty proceedings under section 271(1)(a). 2. It has been held by various courts time and again that when discretion has been vested with a quasi-judicial authority, it has to be exercised reasonably and judiciously and not arbitrarily. It has therefore been decided that unless specifically instructed otherwise by the Board by general order the Income-tax Officers should invariably record their reasons for not initiating penalty proceedings under section 271(1)(a) of the Income-tax Act, 1961. So long as discretion has been exercised properly, the Audit will not question the judicial exercise of discretion by the Income-tax Officer. 3. This may be brought to the notice of all officers in your charge.