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JUDGEMENTS I.T.R. 1/1985 Back To Index
OF JAMMU AND KASHMIR AT SRINAGAR.
Date of Decision: 11.05.2000
Commissioner of Income-tax,
v Pardeep Kumar,Patiala II, Patiala. Jammu.
Whether approved for reporting: Yes
JUDGEMENT AND ORDER
Per Dr. B. P. Saraf, Chief Justice
By this reference under section 256 (2) of the Income-tax Act, 1961 ("Act"), the Income-tax Appellate Tribunal, ("Tribunal") has referred the following question of law to this Court for opinion:
"Whether, on the facts and in the circumstances of the case, the Tribunal had misdirected itself in law in deleting the penalty imposed by the Inspecting Assistant Commissioner of Income-tax?"
This reference is pending in this Court since 1985. The controversy pertains to the cancellation of penalty of Rs.9,000/- imposed under section 271 (1)(c) of the Act in respect of the assessment year 1970-71. The Tribunal deleted the penalty imposed by the Inspecting Assistant Commissioner under section 271 (1)(c) of the Act for the failure of the assessee to disclose in his original return for the assessment year 2970-71 commission of Rs.9,000/- receivable from one M/s Hari Talkies. This income of Rs.9,000/- was later shown in the revised return. The case of the assessee was that the commission income could not be shown in the original return because the accounts of M/s Hari Talkies from whom this commission was due were not reconciled. It was contended by the assessee that as the omission to disclose the commission income of Rs.9,000/- in the original return was inadvertent and not intentional, no penalty could be levied under section 271(1)(c ) of the Act. The Inspecting Assistant Commissioner did not accept the above contention of assessee and levied penalty of Rs.9000/- under section 271 (1)(c) of the Act. It is this penalty which was deleted by the Tribunal. The Tribunal arrived at a finding of fact that the omission was not intentional and, in that view of the matter, held that no penalty could be imposed. The Tribunal, therefore, deleted the penalty. The Tribunal also rejected the application of the revenue under section 256(1) of the Act for referring the question proposed by the revenue to this Court, as in its opinion, it was a question of fact. However, later it made the present reference on the direction of this Court under section 256(2) of the Act.
We have heard Mr. Anil Ban, learned Senior Central Government Standing Counsel and perused the order of the Tribunal. The Tribunal has recorded categorical finding of fact that the omission to disclose the commission income of Rs.9, 000/- in the original return of the assessee was not intentional. It is in view of this finding of fact that the Tribunal has held that no penalty could be imposed under section 271 (1)(c) of the Act. We do not find any infirmity in the above conclusion of the Tribunal
Law is well-settled that an order imposing penalty is a result of quasi-criminal proceedings and penalty should 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 obligation. No penalty should be imposed if the assessee was acting in honest and genuine belief in a particular manner. As held by the Supreme Court in Hindustan Steel Limited v State of Orissa (1972) 83 ITR 26, penalty should not 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 consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose the penalty, when there is a technical or venial breach of the provisions of the Act or when the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. In the present case there is a categorical finding of the Tribunal that the omission to disclose the commission income of Rs.9,000/- in the original return was not intentional. On the face of this finding, penalty levied by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act for alleged furnishing of inaccurate particulars of income cannot be sustained. In these circumstances, in our opinion, the Tribunal was justified in deleting the penalty imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act.
In view of the above, the question referred to us is answered in the negative, i.e., in favour of the assessee and against the revenue.
Reference disposed of accordingly with no order as to costs.