9911796707
TMI Blog1991 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... uly 31, 1972. During the course of assessment proceedings, the Income-tax Officer found that in each of the two partners' accounts a sum of Rs. 56,735.50 stood credited. The assessee explained that the above sum represented the amount which the assessee was entitled to introduce in its books of account as per the settlement made with the Commissioner of Income-tax on December 29, 1970, under section 271(4A) of the Income-tax Act. The assessee had filed a petition under section 271(4A) to the Commissioner for the assessment years 1960-61 to 1965-66 disclosing a sum of Rs. 1,15,000 representing certain hundi loans and a settlement as detailed in the order of the Commissioner was arrived at. Clause 7 of the terms of the above settlement is as follows : "The assessee shall be allowed to introduce in its books of account 50 per cent. of the disclosed amount or an amount equivalent to the tax and penalty liabilities arising as a result of the settlement, whichever is higher. " Before the Income-tax Officer, the assessee claimed that an amount of Rs. 1,13,471 was introduced and credited in the accounts of the partners as per the above settlement. The Income-tax Officer Was however, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come up for determination. We, however, reframe question No. 1 as follows: "(1) Whether there was no material or evidence before the Tribunal to justify that the sum of Rs. 55,971 represented concealed income of the appellant-firm and whether the order of the Tribunal is otherwise unreasonable and perverse ?" It has been argued on behalf of the assessee that there is no lack of bona fides on the part of the assessee and, when two views are possible on the interpretation of the settlement dated December 29, 1970, the assessee should get the benefit thereof and further that there is no wilful breach of the provisions of law and, therefore, penalty proceedings cannot be initiated and no penalty can be levied against the assessee. It has been further submitted on behalf of the assessee that there was no material or evidence before the Tribunal to justify that the sum of Rs. 55,971 represented concealed income of the appellant-firm and the order of the Tribunal in that respect is liable to be set aside. Learned advocate for the assessee in this connection, relied upon the following decisions : Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 ; AIR 1970 SC 253; CIT v. Nurud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax dated December 29, 1970, the assessee was allowed to introduce in its books of account 50 per cent. of the disclosed amount, that is, Rs. 57,500 (being 50 per cent. of Rs. 1,15,000) or an amount equivalent to the tax and penalty liability arising as a result of settlement, whichever was higher. The assessee, however, contrary to the said settlement, introduced Rs. 1,13,471 by crediting the accounts of its partners by a sum of Rs. 57,375.50 each. The assessee under the said order of the Commissioner of Income-tax dated December 29, 1970, can introduce either Rs. 57,500 or the aggregate of the tax and penalty arising out of the settlement, whichever was higher. In this case, it was Rs. 57,962. The assessee has thus wrongfully introduced in the capital accounts of its partners the excess sum of Rs. 55,971 which represents the assessee's undisclosed income by wrongful capitalising of the same in its books of account. This act of the assessee in capitalising the excess sum of Rs. 55,971 clearly amounts to an act of gross or wilful neglect. The assessee failed to discharge the onus of proving that there was no wilful neglect in capitalising the said sum and no two views are possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account and honestly believed them to be sufficient for the true ascertainment of its profits and that it could not be said that, in filing the return of income as reflected in the books of account, the respondent was grossly or wilfully negligent, much less fraudulent. The Tribunal and the High Court rejected the Department's applications for a reference. On appeal to the Supreme Court, it was held accordingly, dismissing the appeal, that the Tribunal and the High Court had rightly rejected the Department's applications for a reference. The Tribunal's conclusion on relevant and sufficient material was that the respondent had discharged its onus to prove that the difference was not due to gross or wilful neglect or fraud, which was a conclusion of fact and no question of law arose. The Tribunal had borne in mind the relevant principles of law and had also judged the facts on record. This was not a case where there was no evidence nor a case where no reasonable person could have accepted the explanation of the respondent. In our opinion, the aforesaid decision cannot be of any assistance to the assessee. In the instant case, there was sufficient evidence to justify that the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding material belonging to the company for an agreed price did not constitute a sale. Under the Act, penalty may be imposed for failure to register as dealer under section 9(1) read with section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligations. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose the penalty when there is a technical breach of the provisions of the Act or where the breach flows from a bona fide belief that th ..... 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