Commissioner of Income Tax vs V.S.K. Adi Chetty Suravel Chetty

R. Jayasimha Babu, J.—The Assessing Officer has discretion u/s 271(1)(c) of the Income Tax Act, 1961, whether or not to initiate penalty

proceedings. The word used in the section is ""may"". The Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa, , has laid down

that the penalty will not be imposed merely because it is lawful to do so where a discretion is given to the authority.

In this case, admittedly, in relation to the assessment year 1960-61, the Commissioner had directed that the penalty proceedings which had

been initiated earlier be dropped and, in obedience to that order, the penalty proceedings had also been dropped by the Inspecting Assistant

Commissioner. That was on March 29, 1972.

Long thereafter, fresh penalty proceedings were said to be initiated on February 18, 1978. After the dropping of the penalty proceedings by the

Inspecting Assistant Commissioner, on the basis of the satisfaction which the Commissioner had reached that the disclosure made by the assessee

was voluntary and the penalty proceedings were not to be continued. It was not open to the Revenue to start fresh penalty proceedings on

February 18,1978, for the very same assessment year. The discretion exercised by the Assessing Officer was a discretion which had been

properly exercised. The order dropping the proceedings having been allowed to become final it was not open to the other officers who dealt with

the files subsequently to initiate penalty proceedings for the very same assessment year.

The first question referred to us is, therefore, answered in favour of the assessee and against the Revenue. Having regard to that answer it is not

necessary to deal with the other questions, which are returned unanswered.