JUDGMENT
By the court
We have heard Mr. Sundeep Bhandawat, learned counsel for the revenue and Mr. Shri Prakash, learned counsel for the respondent-assessee.
2. Instant application has been made under section 256(2) of the Income Tax Act seeking following reference for our opinion arising from the order of the Tribunal, dated 12-6-1996 ”
1. Whether, on the facts and in the circumstances of the case, the Tribunal is legally justified in confirming the order of the Commissioner (Appeals) whereby the penalty levied under section 140A(3) amounting to Rs. 1,13,000 was cancelled ?
2. 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 default committed under section 140A of the Income Tax Act ?
3. 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 assessment year 1982-83 on 3-5-1983, 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 section 140A of the Act and inflicted a penalty of Rs. 1, 13,000.
On appeal, the Commissioner (Appeals) 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 Commissioner (Appeals) deleted the penalty.
On an appeal by the revenue, the Tribunal after elaborate discussion, confirmed the finding of the Commissioner (Appeals).
4. It is contended by Mr. Sundeep Bhandawat that in view of the provisions of section 140A(3) as it existed on 1-4-1976, there was no discretion with the assessing authority except to inflict penalty in case of default. For the convenience, the sub-clause (3) of section 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-section (1), the assessing officer 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-clause (3) of section 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, dated 24-10-1979, rendered in D.B. Civil IT Ref. No. 65/1978, CIT v. Jaipur Electro (P) Ltd. (1990) 183 ITR 476 (Raj). In the said case, there was a delay in payment of due amount, as such the penalty was imposed by the Income Tax Officer. 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 Commissioner (Appeals) 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.
OPEN