TMI Blog1989 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of its unfavourable financial position which became worse because of the extra wages that had to be paid as a result of the conciliation settlement dated August 11, 1977. But the assessee informed the Income-tax Officer that it had already made arrangements for the payment of the demand. Nevertheless, the Income-tax Officer imposed a penalty of Rs. 16,990 under section 221 (1) of the Income-tax Act, 1961. On appeal, the Commissioner of Income-tax (Appeals) cancelled the penalty. The Department went in appeal before the Tribunal and the Tribunal upheld the order of the Commissioner of Income-tax (Appeals). It is thereafter that the Commissioner of Income-tax got the following question of law arising out of the order of the Tribunal dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efaults in payment of tax including advance tax under section 210. But the liability to pay penalty does not arise merely upon proof of default. In Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, the Supreme Court held that (headnote) : "Penalty will 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 in conscious disregard of its obligation. Penalty will not also 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty where an assessee is in default in making a payment of tax. But it appears to us that the imposition of a penalty cannot be an automatic consequence of a default by way of non-payment of tax. In our opinion the decision of the Supreme Court in the case of Hindustan Steel Ltd. [1972] 83 ITR 26, has direct relevance to this issue and it has in fact been held in a large number of decisions even under the Income-tax Act that the principles of this decision would apply to the imposition of a penalty under the Income -tax Act also." it was also held that the existence of good and sufficient reasons may be a ground to persuade the Income-tax Officer not to impose a penalty under section 221. In fact, the second proviso clearly says that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural income-tax of Rs. 18,90,000 from September, 1977, to March, 1978, bonus payments of Rs. 4,50,000 for 1976-77 on November 17, 1977, and arrears of wages of Rs. 5,50,000 on September 29, 1977. The Tribunal adverted to this fact and held that the assessee has been able to establish that it was in a tight position financially and that it did not have the funds necessary to meet its liabilities. Therefore, in the light of the decision of the Madras High Court in Nachimuthu Industrial Association v. CIT [1980] 123 ITR 611, the Tribunal held that the paucity of funds could be considered to be a reasonable cause taking into account the other circumstances as well. It was held in a recent judgment of this court in T. R. C. Nos. 32 and 33 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
