COMMISSIONER OF INCOME-TAX VS ASK ENTERPRISES
1999 P T D 3474
[230 I T R 48]
[Bombay High Court (India)]
Before Dr. B. P. Saraf and Dr. Pratibha Upasani, JJ
COMMISSIONER OF INCOME-TAX
Versus
ASK ENTERPRISES
Income-tax Application No.7 of 1997, decided on 16/07/1997.
Income-tax-
----Reference---Penalty---Concealment of income---Finding that there had been an inadvertent mistake in not including value of a particular item in closing stock---Tribunal justified in cancelling penalty---No question of law arose---Indian Income Tax Act, 1961, Ss.256 & 271(1)(c).
The order imposing penalty is a result of a quasi-criminal proceeding, and penalty should not ordinarily be imposed unless the party either acted deliberately in defiance of law or was guilty of conduct, contumacious or dishonest, or acted in conscious disregard of its obligation. 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 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 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. If the assessee was acting in honest and genuine belief in a particular manner, then no penalty could be imposed:
Held, that, in the instant case, there was a categorical finding of the Commissioner of Income-tax (Appeals) to the effect that the mistake in not including the value of titanium dioxide in the closing stock was inadvertent and bona fide and, therefore; did not lead to any concealment on the part of the assessee. It was on the basis of this finding of the Commissioner of Income-tax (Appeals) that the appeal of the Revenue was dismissed by the Income-tax Appellate Tribunal. The decision of the Tribunal affirming the above order of the Commissioner was, thus, based on an un-controverted finding of fact. The cancellation of penalty was justified. No question of law arose from the order.
Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC) applied
T.U. Khatri with J.P. Deodhar for Applicant
K.B. Bhujle with S.H. Inamdar for Respondent
JUDGMENT
DR. B.P. SARAF, J.---By this application under section 256(2) of the Income Tax Act, 1961, the Commissioner of Income-tax, Pune, seeks a direction to the Income-tax Appellate Tribunal do state the case and refer the following questions of law to this Court for opinion:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty under section 271(1)(c) holding that an inadvertent mistake committed by the assessee cannot be equated with an act of concealment?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in camouflaging the fact of concealment by inadvertent and bona fide mistake?"
We have heard Mr. Khatri, learned counsel for the Revenue, and Mr. Bhujle, learned counsel for the assessee. We have also perused the order of the Tribunal on the merits as well as the order rejecting the reference application under section 256(1) of the Income-tax Act.
So, far as question No.2 is concerned, Mr. Khatri, learned counsel for the Revenue, fairly stated before us that the same does not arise from the order of the Tribunal and in that view of the matter, question No.2 is not a referable question of law.
So far as question No. 1 is concerned, in our opinion, the said question is also not a referable question of law as the answer thereto is obvious.
The law is well-settled that an order imposing penalty is a result of a quasi-criminal proceeding, 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 iii conscious disregard of its obligation. In Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26, the Supreme Court has held that the 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 a consideration of all the relevant circumstances. It was held by the Supreme Court that 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 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. It was further held that if the assessee was acting in honest and genuine belief in a particular manner, then no penalty could be imposed.
In the instant case, there is a categorical finding of the Commissioner of Income-tax (Appeals) to the effect that the mistake of riot including the value of titanium dioxide in the closing stock was inadvertent and bona fide and therefore, did not lead to any concealment on the part of the assessee. It was on the' basis of this finding of the Commissioner of Income-tax (Appeals) that the appeal of the Revenue was dismissed by the Income-tax Appellate Tribunal. The decision of the Tribunal affirming the above order of the Commissioner is, thus, based on an un-controverted finding of fact. That being so, the question sought 'to be referred is a pure question of fact which cannot be referred to this Court for opinion under section 256 of the Act. The Tribunal was, therefore, justified in refusing to refer the same.
In the result, this application stands rejected. No order as to costs.
M.B.A./3099/FC???????????????????????????????????????????????????????????????????? ?????????? Application rejected.