Law:

Section:

Section 271(1)(a) of the Income-tax Act, 1961 - Penalty - For late filing of return - Assessment year 1964-65 - Whether imposition of penalty under section 271(1)(a) is not obligatory and that Tribunal has discretion to delete penalty when there is a mere minor breach of law - Held, yes - ITO held assessee firm liable for penalty under section 271(1)(a) - Tribunal, however, found that partners of assessee firm who had no other source of income had already been made liable for penalty for late filing of their respective returns - Further, assessee - Firm had voluntarily field its return before close of financial year without issue of notice under section 139(2) - Assessee firm had even paid advance tax as per demand made - On basis of aforesaid findings, Tribunal deleted penalty - Whether, on facts, Tribunal rightly exercised its discretion in deleting penalty levied on assessee-firm - Held, yes FACTS The ITO held the assessee-firm liable for penalty under section 271(1)( a) for late filing of the return without any reasonable cause. The same view was taken by the AAC. The Tribunal however, deleted the penalty on the grounds that the partners of the assessee who had not other source of income had been made liable for penalty for late filing of their respective returns and thus stood already punished; that the assessee-firm voluntarily filed its return before the close of the financial year without the issue of a notice under section 139(2); that the assessee had paid the advance tax as per demand made and that having regard to all the facts and circumstances ends of justice demanded that the penalty on the assessee be not imposed. On reference: HELD The imposition of penalty under section 271(1)(a ) is not obligatory in every case and that the Tribunal has some discretion in the matter. The words "may direct that such person shall pay by way of penalty" as used in the section leave a certain amount of discretion in imposition of penalty which need not be imposed when there is a mere minor breach of the law and, when having regard to the facts, ends of justice require that the assessee should not be penalised. The Tribunal having regard to the facts and…

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