1.1 In fiscal Statutes, the import of the words – “tax”, “interest”, “penalty”, etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforced by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty — which is penal in character .
1.2 It is implicit in the word “concealed” that there has been a deliberate act on the part of the assessee. The meaning of the word “concealment” as found in Shorter Oxford English Dictionary, 3rd Edition, Volume I, is as follows :- “In law, the intentional suppression of truth or fact known, to the injury or prejudice of another.” The word “concealment”” inherently carried with it the element of mens rea. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1)(c) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. The omission of the word “deliberate”, thus, may or may not be of much significance but what is material is its application. Section 271 (1) (c) remains a penal statute. Rule of Ingredients of imposing penalty remains the same. The purpose of the Legislature that it is meant to be deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985 .
1.3 In Webster's Dictionary, "inaccurate" has been defined as: "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."
It signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars. The term 'inaccurate particulars' is not defined.
1.4 'Concealment of income' and 'furnishing of inaccurate particulars' are different. Both concealment and furnishing inaccurate particulars refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi. Although it may not be very accurate or apt but suppressio veri would amount to concealment, suggestio falsi would amount to furnishing of inaccurate particulars.
1.5 It is now a well-settled principle of law that more stringent the law, more strict construction thereof would be necessary. Even when the burden is required to be discharged by an assessee, it would not be as heavy as the prosecution . A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime .
2.1 Recently controversy has been arisen after the decision of Supreme Court in case of Dharmendra Textile . The Court observed that it is settled law that penalty under section 271(1)(c) is a civil liability and the revenue is not required to prove willful concealment. Revenue has started interpreting the decisions that penalty u/s 271(1)(c) is automatic and in every case of non payment of duty (tax) would lead to levy of penalty.
2.2 In view of the said decision revenue started believing that entire income which remained undisclosed, “with or without” any conscious act of the assessee, was liable to penal action. Further, the concept of law, with regard to levy of penalty has drastically changed in view of the said judgment, in as much as, now penalty can be levied even when an assessee claims deduction or exemption by disclosing the correct particulars of its income. Accordingly revenue started levy of penalty virtually in each and every case where there is disallowance of any claim whether it is an expenditure or any deduction irrespective of the fact that assessee had bona fied belief or genuine mistake.
2.3 Such an attempt had lead tremendous hardship to the various assessee. In light of this background let us understand whether now levy of penalty is automatic or still it depends upon facts and circumstances of each?
2.4 It is to be remembered that, in the case Dharmendra Textile, issue before the court was the penalty under section 11A of Central excise and rules thereunder and it primarily was not dealing with concealment penalty under income-tax. The said judgement is under a different legislative enactment need to bore in mind before considering its application under Income-tax.
2.5 Concealment of particulars of income, or furnishing incorrect particulars of income, should not be confused with, an unacceptable plea for exemption of tax – liability. They are two distinct and separate.
2.6 Each and every addition made in the assessment cannot automatically lead to levy of penalty for concealment of income. A case for imposition of penalty has to be examined in terms of the provisions of Explanation 1 to section 271(1)(c). Further, it is a settled legal position that penalty proceedings are different from assessment proceedings. The finding given in the assessment though is a good evidence but the same is not conclusive in penalty proceedings. It is, therefore, necessary to re-appreciate and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1 )(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. Explanation 1 to sect ion 271(1) (c) in respect of any fact relating to the computation of total income states that the amount added or disallowed in computing the total income of an assessee shall be deemed to be the income in respect of which particulars have been concealed. This deeming provision for concealment is not absolute one. The presumption under the explanation 1 is rebut table and not conclusive. The assessee can submit the explanation as the onus shifts on to the assessee to prove that he has not concealed the particulars of the income.
2.7 It is well established that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under Section 271(1)(c) of the Act, even if the claim made by him is not sustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bonafide. If the explanation is neither substantiated nor shown to be bonafide, explanation 1 to Section 271(1)(c) would come in to play and the assessee will be liable to for the prescribed penalty. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide .
3.1 Recently Supreme Court again in UOI vs. Rajasthan Spinning & Weaving Mills has elucidate its intention in the Dharmendra Textile as under:
“In our view the reason assigned by the Tribunal to strike down the levy of penalty against the assessees is as misconceived as the interpretation of Dharamendra Textile is misconstrued by the Revenue. In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non – payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11AC would apply to every case of non – payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharamendra Textile could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. That is what Dharamendra Textile decides. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textile is only in so far as section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it!) with regard to the several other statutory provisions that came up for consideration in that decision.” (emphasis supplied)
3.2 High Court of Punjab & Haryana In Siddhartha Enterprises has held that the judgment of the Hon’ble Supreme Court in Dharmendra Textile cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under section 271(1)(c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake.
3.3 Court in case of Haryana Warehousing has observed that revenue’s thought process that the concept of levy of penalty has undergone drastic change with the decision in case Dharmendra Textile and in every case where there is addition of income to returned income, penalty is levied, in not tenable. Further if revenues view is accepted then the assessee who canvasses a claim on the basis of its (assessee' s) interpretation of the law, would be liable to penal action, in case, the Revenue finds that the claim raised by the assessee is not acceptable. Such a determination would place curbs on the rights of an assessee to raise claims it believes to be genuine under the law. It further observed that said decision has not placed any fetters on the rights of the assessee to raise genuine claims in its return.
3.4 Recently Mumbai ITAT in case of ITO v. Parikh Investment & Development P. Ltd. ITA No. 4760/Mum/2009 order dtd 7-5-2010 has reiterated the observations of a recent judgment of the Hon’ble Apex Court in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158(SC) as under :
“.....In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income tax, Delhi vs. Atul Mohan Bindal [2009] 9 SCC 589, where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India vs. Dharamendra Textile Processors [2008] 13 SCC 369, as also, the decision in Union of India vs. Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448 and reiterated in para 13 that (page 13 of 317 ITR):
13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist.” Their Lordships, after considering various decisions including Dilip N. Shroff vs. JCIT (2007) 291 ITR 519(SC) and Union of India vs. Dharamendra Textile Processors (2008) 306 ITR 277(SC) have observed and held (page 158 headnotes) as under :
“A glance at the provisions of section 271(1)(c) of the Income- tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
Tribunal subsequently held as under:
“Respectfully following the above decision of Hon’ble Apex Court and keeping in view that it is not the case of the revenue that the assessee has not filed complete particulars of his income or it is not the case of bonafide belief or the explanation offered by the assessee was found to be false or untrue, we are of the view that making a wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty u/s. 271(1)(c) of the Act. This view also finds support from the recent decisions in CIT vs. Sidhartha Enterprises (2010) 322 ITR 80 (P&H) and CIT vs. Shahabad Co-op. Sugar Mills Ltd. (2010) 322 ITR 73(P&H). Accordingly we are inclined to uphold the order of the ld. CIT(A) in deleting the penalty imposed by the AO. The ground taken by the revenue is therefore, rejected.” (Emphasis Supplied)
3.5 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 .
Even after the decision of Dharmendra Textiles, levy of concealment penalty is not automatic even in case where additions have been confirmed by appellate authorities. In order to levy penalty the assessing officer is yet required to give finding based on some contradictory evidence to disprove that explanation offered by the assessee false.
1.2 It is implicit in the word “concealed” that there has been a deliberate act on the part of the assessee. The meaning of the word “concealment” as found in Shorter Oxford English Dictionary, 3rd Edition, Volume I, is as follows :- “In law, the intentional suppression of truth or fact known, to the injury or prejudice of another.” The word “concealment”” inherently carried with it the element of mens rea. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1)(c) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. The omission of the word “deliberate”, thus, may or may not be of much significance but what is material is its application. Section 271 (1) (c) remains a penal statute. Rule of Ingredients of imposing penalty remains the same. The purpose of the Legislature that it is meant to be deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985 .
1.3 In Webster's Dictionary, "inaccurate" has been defined as: "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."
It signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of concealment of income or furnishing of inaccurate particulars. The term 'inaccurate particulars' is not defined.
1.4 'Concealment of income' and 'furnishing of inaccurate particulars' are different. Both concealment and furnishing inaccurate particulars refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi. Although it may not be very accurate or apt but suppressio veri would amount to concealment, suggestio falsi would amount to furnishing of inaccurate particulars.
1.5 It is now a well-settled principle of law that more stringent the law, more strict construction thereof would be necessary. Even when the burden is required to be discharged by an assessee, it would not be as heavy as the prosecution . A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime .
2.1 Recently controversy has been arisen after the decision of Supreme Court in case of Dharmendra Textile . The Court observed that it is settled law that penalty under section 271(1)(c) is a civil liability and the revenue is not required to prove willful concealment. Revenue has started interpreting the decisions that penalty u/s 271(1)(c) is automatic and in every case of non payment of duty (tax) would lead to levy of penalty.
2.2 In view of the said decision revenue started believing that entire income which remained undisclosed, “with or without” any conscious act of the assessee, was liable to penal action. Further, the concept of law, with regard to levy of penalty has drastically changed in view of the said judgment, in as much as, now penalty can be levied even when an assessee claims deduction or exemption by disclosing the correct particulars of its income. Accordingly revenue started levy of penalty virtually in each and every case where there is disallowance of any claim whether it is an expenditure or any deduction irrespective of the fact that assessee had bona fied belief or genuine mistake.
2.3 Such an attempt had lead tremendous hardship to the various assessee. In light of this background let us understand whether now levy of penalty is automatic or still it depends upon facts and circumstances of each?
2.4 It is to be remembered that, in the case Dharmendra Textile, issue before the court was the penalty under section 11A of Central excise and rules thereunder and it primarily was not dealing with concealment penalty under income-tax. The said judgement is under a different legislative enactment need to bore in mind before considering its application under Income-tax.
2.5 Concealment of particulars of income, or furnishing incorrect particulars of income, should not be confused with, an unacceptable plea for exemption of tax – liability. They are two distinct and separate.
2.6 Each and every addition made in the assessment cannot automatically lead to levy of penalty for concealment of income. A case for imposition of penalty has to be examined in terms of the provisions of Explanation 1 to section 271(1)(c). Further, it is a settled legal position that penalty proceedings are different from assessment proceedings. The finding given in the assessment though is a good evidence but the same is not conclusive in penalty proceedings. It is, therefore, necessary to re-appreciate and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1 )(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. Explanation 1 to sect ion 271(1) (c) in respect of any fact relating to the computation of total income states that the amount added or disallowed in computing the total income of an assessee shall be deemed to be the income in respect of which particulars have been concealed. This deeming provision for concealment is not absolute one. The presumption under the explanation 1 is rebut table and not conclusive. The assessee can submit the explanation as the onus shifts on to the assessee to prove that he has not concealed the particulars of the income.
2.7 It is well established that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under Section 271(1)(c) of the Act, even if the claim made by him is not sustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bonafide. If the explanation is neither substantiated nor shown to be bonafide, explanation 1 to Section 271(1)(c) would come in to play and the assessee will be liable to for the prescribed penalty. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide .
3.1 Recently Supreme Court again in UOI vs. Rajasthan Spinning & Weaving Mills has elucidate its intention in the Dharmendra Textile as under:
“In our view the reason assigned by the Tribunal to strike down the levy of penalty against the assessees is as misconceived as the interpretation of Dharamendra Textile is misconstrued by the Revenue. In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non – payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11AC would apply to every case of non – payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharamendra Textile could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. That is what Dharamendra Textile decides. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textile is only in so far as section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it!) with regard to the several other statutory provisions that came up for consideration in that decision.” (emphasis supplied)
3.2 High Court of Punjab & Haryana In Siddhartha Enterprises has held that the judgment of the Hon’ble Supreme Court in Dharmendra Textile cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under section 271(1)(c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default and not a mere mistake.
3.3 Court in case of Haryana Warehousing has observed that revenue’s thought process that the concept of levy of penalty has undergone drastic change with the decision in case Dharmendra Textile and in every case where there is addition of income to returned income, penalty is levied, in not tenable. Further if revenues view is accepted then the assessee who canvasses a claim on the basis of its (assessee' s) interpretation of the law, would be liable to penal action, in case, the Revenue finds that the claim raised by the assessee is not acceptable. Such a determination would place curbs on the rights of an assessee to raise claims it believes to be genuine under the law. It further observed that said decision has not placed any fetters on the rights of the assessee to raise genuine claims in its return.
3.4 Recently Mumbai ITAT in case of ITO v. Parikh Investment & Development P. Ltd. ITA No. 4760/Mum/2009 order dtd 7-5-2010 has reiterated the observations of a recent judgment of the Hon’ble Apex Court in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158(SC) as under :
“.....In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income tax, Delhi vs. Atul Mohan Bindal [2009] 9 SCC 589, where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India vs. Dharamendra Textile Processors [2008] 13 SCC 369, as also, the decision in Union of India vs. Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448 and reiterated in para 13 that (page 13 of 317 ITR):
13. It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist.” Their Lordships, after considering various decisions including Dilip N. Shroff vs. JCIT (2007) 291 ITR 519(SC) and Union of India vs. Dharamendra Textile Processors (2008) 306 ITR 277(SC) have observed and held (page 158 headnotes) as under :
“A glance at the provisions of section 271(1)(c) of the Income- tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”
Tribunal subsequently held as under:
“Respectfully following the above decision of Hon’ble Apex Court and keeping in view that it is not the case of the revenue that the assessee has not filed complete particulars of his income or it is not the case of bonafide belief or the explanation offered by the assessee was found to be false or untrue, we are of the view that making a wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty u/s. 271(1)(c) of the Act. This view also finds support from the recent decisions in CIT vs. Sidhartha Enterprises (2010) 322 ITR 80 (P&H) and CIT vs. Shahabad Co-op. Sugar Mills Ltd. (2010) 322 ITR 73(P&H). Accordingly we are inclined to uphold the order of the ld. CIT(A) in deleting the penalty imposed by the AO. The ground taken by the revenue is therefore, rejected.” (Emphasis Supplied)
3.5 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 .
Even after the decision of Dharmendra Textiles, levy of concealment penalty is not automatic even in case where additions have been confirmed by appellate authorities. In order to levy penalty the assessing officer is yet required to give finding based on some contradictory evidence to disprove that explanation offered by the assessee false.
