Commissioner of Income Tax vs ARK Corporation

The revenue is aggrieved by an order dated 26-5-2006 passed by the Income Tax Appellate Tribunal, Delhi Bench ''D'' in ITA No. 2392/Delhi/ 2002 relevant for the assessment year 1998-99.

The assessee had deducted tax at source but had issued the TDS certificate late. On this basis, the revenue sought to impose a penalty upon the assessee under the provisions of Section 272A(2)(g) of the Income Tax Act, 1961.

The Tribunal relied upon a decision of the Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa, wherein the Supreme Court observed as follows:

...An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and 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 minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.... (p. 29)

The revenue is seeking to levy penalty on the assessee only because it has the power to do so. It has refused to exercise its discretion which it should have, as held by the Supreme Court. In matters of this nature where only a technical default is committed, there is hardly any reason to levy penalty.

We are of the opinion that no substantial question of law arises for our consideration.

The appeal is dismissed.