Initiation of penalty proceedings. - Income Tax - 1622/CBDT

INSTRUCTION NO. 1622/CBDT Dated: June 4, 1985 Instructions already exist that penalty proceedings should not be initiated in a routine manner without application of mind to the facts of each case. However, mounting arrears of penalty proceedings indicate that the field officers initiate the penalty proceedings in a mechanical manner resulting in creation of infructuous work, harassment to the assessees as well as immense damage to the Department's public image. 2. Before initiating a penal action, the assessing officer has to satisfy himself that there is a prima facie case for doing so. The form of return of income now provides a column for furnishing reasons for delay in the submission of return. This information and other information on record having a bearing on the question should be considered before initiating penalty proceedings. The Board have from time to time issued instructions with a view to minimising the generation of unproductive work. Various instruction issued in this regard are listed below:- (a) The Income Tax Officer shall not initiate any proceedings for imposition of penalty for an offence under the clause(A) or clause (b) of sub-section (1) of section 271 or u/s.273 in respect of any assessment year in a case where the maximum penalty imposable under the relevant clause does not exceed Rs.100 [F.No.284/64/77-IT(Inv), dated 23-1-1978]. (b) The ITO shall not initiate penalty proceedings u/s.271(1)(a) where the income returned and assessed are at a positive figure and below taxable limit and there is no set off of brought forward losses [F.No.284/4/75-IT(Inv), dated 18-10-75]. 3. With a view to initiating penalty proceedings in smaller cases, the Board have revised their order u/s.119(2) of the act referred to in para 2(a) above w.e.f. 3rd June, 1985. Henceforth proceedings u/s.271(1)(a), 271(1)(b) and 273 of the I.T.Act will not be initiated in respect of any assessment year in a case where the maximum penalty imposable under the relevant clause does not exceed Rs.500. Board have also decided that all pending proceedings should be dropped if the maximum penalty imposable under any of the clauses mentioned above does not exceed Rs.500. 4. If the penalty proceedings are initiated only after application of mind to the facts of the case, the infructous initiation of penalty proceedings will substantially come down. It is suggested that where penalty is not initiated a footnote indicating the relevant facts may be given in the order-sheet to take care of audit objection, if any in this regard. Where penalty is initiated and levied, selfspeaking cogent and well reasoned order should be passed as according to appellate authorities cyclostyled/printed penalty order constitutes clear evidence of lack of application of mind. Hence in future cyclostyled/printed penalty orders should not be passed. Any non-compliance with these instructions will be viewed seriously. 5. These instructions may be brought to the notice of all the officers working in your charge.