Madras H.C : the penalty will not be imposed merely because it is lawful to do so where a discretion is given to the authority.

High Court Of Madras

CIT vs. V.S.K. Adi Chetty Suravel Chetty (Dissolved) By Partners

Section 271(1)(c)

Asst. Year 1960-61

R. Jayasimha Babu & C. Nagappan, JJ.

Tax Case No. 231 of 1982

9th August, 2001

Counsel Appeared

T. Ravi Kumar, for the Revenue : R. Janakiraman, for the Respondents

JUDGMENT

R. JAYASIMHA BABU, J. :

The AO has discretion under s. 271(1)(c) of the IT Act, 1961, whether or not to initiate penalty proceedings. The word used in the section is “may”. The Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC) : TC 49R.330, has laid down that the penalty will not be imposed merely because it is lawful to do so where a discretion is given to the authority.

In this case, admittedly, in relation to the asst. yr. 1960-61, the CIT had directed that the penalty proceedings which had been initiated earlier be dropped and, in obedience to that order, the penalty proceedings had also been dropped by the IAC. That was on 29th March, 1972. Long thereafter, a fresh penalty proceedings was said to be initiated on 18th Feb., 1978. After the dropping of the penalty proceedings by the IAC, on the basis of the satisfaction which the CIT had reached that the disclosure made by the assessee was voluntary and the penalty proceedings were not to be continued, it was not open to the Revenue to start fresh penalty proceedings on 18th Feb., 1978, for the very same assessment year. The discretion exercised by the AO was a discretion which had been properly exercised. The order dropping the proceedings having been allowed to become final it was not open to the other officers who dealt with the files subsequently to initiate penalty proceedings for the very same assessment year.

The first question referred to us is, therefore, answered in favour of the assessee and against the Revenue. Having regard to that answer it is not necessary to deal with the other questions, which are returned unanswered.

[Citation : 254 ITR 633]

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