The Commissioner Of Income Tax vs M/S. Dodsal Ltd
2008 Latest Caselaw 43 Bom

HVN
             IN   THE HIGH COURT OF JUDICATURE AT BOMBAY

               ORDINARY ORIGINAL CIVIL JURISDICTION

                  INCOME TAX APPEAL NO. 30 OF 2008


      The Commissioner of Income Tax           ...    Appellant




                                                                              
                                    Versus




                                                      
      M/s. Dodsal Ltd.                         ...    Respondent

      Mr.   B.M.Chatterjee with Mrs.Poonam Bhosale for the
      Appellant.




                                                     
      Mr.   Atul Jasani         with    Mr.    P.C.      Tripathi          for
      Respondent.

                       CORAM: F.I. REBELLO &
                              K.U.CHANDIWAL,JJ.

DATED: JULY 02, 2008 ORAL JUDMENT (Per F.I. Rebello,J.):

.

Admit on the following two questions :

"(a) Whether on the facts and in the

circumstances of the case and in law, the

Hon'ble ITAT is correct in deleting the

penalty levied u/s. 158 BFA (2) of the

Income Tax Act, 1961 without appreciating

the fact that the assessee has failed to

comply with the conditions stipulated in the

1st proviso to Section 158 BFA (2) of the

Income Tax Act, 1961?

               (b)     Whether    on     the    facts      and      in     the

               circumstances      of     the case and in law,              the

               Hon'ble    ITAT is correct in interpreting the

               condition     stipulated in the 1st proviso                  to

               Section    158 BFA (2) of the Income Tax                  Act,

1961 as directory and not mandatory?"

2. C.I.T. by its order dated 15.10.2003 allowed

the appeal preferred by the assessee and cancelled

the penalty under Section 158BFA(2) of the Income

Tax Act. While considering the deletion of penalty,

C.I.T. considered, the explanation given by the

assessee that tax had been paid on the undisclosed

income before the completion of the assessment.

Various other reasons have also been rendered.

. In the appeal before I.T.A.T., the learned

tribunal in Para 3.4 after considering the

terminology

of the section was pleased to hold that

the power conferred is directory and not mandatory

and that the word "may" cannot be read as "shall".

The learned tribunal also has considered the reasons

as to why the penalty should not be invoked.

3. In the present appeal, the findings of fact by

I.T.A.T. and C.I.T. regarding reasons for delay in

paying tax have not been assailed. The only

question raised before us is whether the said

provision is directory or mandatory. We have

perused the relevant provision which read as under :

"158BFA(2) : The Assessing Officer or the

Commissioner (Appeals) in the course of any

proceedings under this Chapter, may direct

that a person shall pay by way of penalty a

sum which shall not be less than the amount

of tax leviable but which shall not exceed

three times the amount of tax so leviable in

respect of the undisclosed income determined

by the Assessing Officer under clause (c) of

section 158BC."

. The language used under Section 158BFA(2) is may

direct the person shall pay by way of penalty a sum

which shall not be less than the amount of tax

leviable, but which shall not exceed three times the

amount of tax so leviable in respect of the

undisclosed income determined by the Assessing

Officer under Clause (c) of section 158BC.

    .     The    terminology
                              ig    of the said section           makes       it

    clear    that      there is a discretion in the               Assessing
                            
    Officer      to direct payment of penalty.               The      proviso

    supports this interpretation.               Only if the authority

    decides      to impose penalty then, it will not be less
      


    than    the      tax leviable but shall not            exceed        three
   



    times    the      tax so leviable.        It is     therefore,           not

    possible      to accept the submission on behalf of                      the

Revenue that once the Assessing Officer comes to the

conclusion that there is a breach of the mandate of

Section 158BFA(1), then the penalty should be

imposed. Merely because the expression used is

shall not be less than the amount of tax leviable or

not exceeding three times the tax, does not result

in reading the first part of the section as

mandatory. The proviso to the sub section makes it

clear that there is discretion conferred on the

Commissioner for the reasons which are set out

therein. Whilst considering taxing statute, the

Supreme Court has held that it is settled law that

the expressions used in a taxing statute would

ordinarily be understood in the sense in which it is

harmonious with the object of the statute to

effectuate the legislative intention. It is equally

settled law that, if the language is plain and

unambiguous, one can look fairly at the language

used and interpret it to give effect to the

legislative intention. Tax law, nevertheless, have

to be interpreted reasonably and in consonance with

justice adopting a purposive approach. See

Commissioner of Income tax Vs. Gwalior Rayon Silk

Manufacturing Co. Ltd. 196 ITR 149. In the

instant case,

both C.I.T. and I.T.A.T. have

recorded reasons for exercise of their discretion.

Before us the Revenue has not challenged the said

finding of fact as to the exercise of discretionary

power. We, therefore, uphold the view taken by

I.T.A.T. that the section is directory and not

mandatory.

4. In the light of that, the question as framed

would not arise. Consequently, appeal disposed of.

(K.U.CHANDIWAL, J.) (F.I.REBELLO, J.)