Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is legally justified in confirming the order of the CIT(A) whereby the penalty levied under s. 140A(3) amounting to Rs. 1,13,000 was cancelled ?

High Court Of Rajasthan

CIT vs. H.M. Lalwani (Decd.) Through LRs

Sections 140A(3), 256(2)

Asst. Year 1982-83

N.N. Mathur & Harbans Lal, JJ.

IT Ref. No. 37 of 1998

29th January, 2002

Counsel Appeared

Sundeep Bhandawat, for the Revenue : Shiv Prakash, for the Assessee

JUDGMENT

BY THE COURT :

We have heard Mr. Sundeep Bhandawat, learned counsel for the Revenue and Mr. Shir Prakash, learned counsel for the respondent-assessee.

2. Instant application has been made under s. 256(2) of the IT Act seeking following reference for our opinion arising from the order of the Tribunal, dt. 12th June, 1996 :

Whether, on the facts and in the circumstances of the case, the Tribunal is legally justified in confirming the order of the CIT(A) whereby the penalty levied under s. 140A(3) amounting to Rs. 1,13,000 was cancelled ?

Whether it is necessary to prove existence of any mala fide intention or fraudulent or contumacious conduct of the assessee for imposition of penalty for the defaultcommitted under s. 140A of the IT Act ?

Briefly stated the facts of the case are that assessee H.M. Lalwani, proprietor of Jai Hind College, Jodhpur filed return of income for the asst. yr. 1982-83 on 3rd May, 1983, on an income of Rs. 4,64,650. After the adjustment of advance tax paid he was required to pay self-assessment tax at Rs. 2,80,318. There was a default in payment of the said tax. Therefore, assessing authority initiated proceedings under s. 140A of the Act and inflicted a penalty of Rs. 1,13,000. On appeal, the CIT(A) found substance in the explanation given by the assessee to the effect that he was not in a position to pay the self-assessment tax. Considering the material on record, the CIT(A) deleted the penalty. On an appeal by the Revenue, the Tribunal after elaborate discussion, confirmed the finding of the CIT(A).

4. It is contended by Mr. Sundeep Bhandawat that in view of the provisions of s. 140A(3) as it existed on 1st April, 1976, there was no discretion with the assessing authority except to inflict penalty in case of default. For the convenience, the sub-cl. (3) of s. 140A has it stood prior to the amendment reads as follows : “(3) If any assessee fails to pay the tax or any part thereof in accordance with the provisions of sub-s. (1), the AO may direct that a sum equal to two per cent of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues : Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard.”

5. On reading of sub-cl. (3) of s. 140A it clearly appears that discretion of imposing penalty is vested in the assessing authority. The word used “may” is significant. It gives discretion to the assessing authority to inflict or not to inflict penalty, considering the facts and circumstances of the case. The order of the Tribunal is based on the judgment of the Division Bench of this Court, dt. 24h Oct., 1979, rendered in D.B. Civil IT Ref. No. 65/1978, CIT vs. Jaipur Electro (P) Ltd. (1990) 183 ITR 476 (Raj). In the said case, there was a delay in payment of dueamount, as such the penalty was imposed by the ITO. On the basis of the material available on record, the Tribunal found that there was no justified reason to inflict the penalty.

6. The controversy involved in the instant case is squarely covered by the aforesaid decision of this Court. The Tribunal has confirmed the finding of the CIT(A) on the basis of material on record. No referable question of law arises out of the order of the Tribunal. The reference application is rejected.

[Citation : 258 ITR 276]

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