TMI Blog1990 (8) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... chand Jain and Rs. 40,000 in the name of Punamchand Ratanlal, Rs. 60,000 in the name of the firm, Assam Metals, Rs. 1,24,000 in the name of Assam Tubes, are not true and, therefore, levied a "protective penalty" of Rs. 1,14,000. The assessee thereupon unsuccessfully filed appeals before the Commissioner of Income-tax and the Tribunal. Finally, at the instance of the assessee, the following question is referred for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in maintaining the penalty of Rs. 1,14,000 under section 271(1)(c) of the Income-tax Act, 1961, imposed on a protective basis ?" In the two appeals, the assessee assailed the notices issued on September 5, 1977, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with the conclusion in these two cases and cite one or two cases decided by the Supreme Court of India. The nature of the penalties under the Income-tax Act, 1961, was considered by the courts times out of number and, in many cases, it is seen that the issue is raised by the Revenue that penalties are in the nature of civil sanctions. When penalties are levied, the Revenue contended that the assessee is not prosecuted. When enquiries are made, proceedings do not partake the character of quasi-criminal proceedings. When penalties are levied, a contention was raised that the assessees are not sentenced. Similar views were also expressed before Parliament (see the Debates on the Budget after February 29, 1988, in Parliament). In a brochur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or a criminal prosecution . . . 'penalty' is also frequently used to denote an equivalent by way of damages for a civil wrong and is, in this sense, sometimes applied to stipulated damages for breach of private contracts, wholly independent of statute ......." What norms are observed while penalties are levied are discussed in the case of Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC). In that case, the Supreme Court held that for failure to carry out a statutory obligation ordinarily "penalty is not imposed unless the assessee is guilty of contumacious or dishonest conduct. Penalty is not imposed merely because it is lawful to do so." It is pointed out in that case that, if facts so warrant, penalties may not be imposed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mum penalty as is found in the repealing Act. The repealed Act did not prescribe any limitation as is found in the 1961 Act. The Supreme Court explained that penalties are levied after assessments are completed and not before or never before. The complaint that penalty is left to the discretion of the officers was refuted and, therefore, it was held that there was no violation of the equality principle. That case was followed in Maya Rani Punj v. CIT [1986] 157 ITR 330 (SC). A case which took a different view was overturned and is referred in the latter case. The above discussion shows that penalties are levied after assessment orders and not before the assessment orders. The protective penalty thus, we are of the view, is conceptually ..... X X X X Extracts X X X X X X X X Extracts X X X X
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