“There is not much difference between tax and penalty. The liability for payment of both is imposed as a part of the machinery of assessment and penalty is merely an additional tax imposed in certain circumstances on account of the asscssee’s conduct. Under the Income-tax Act, a penalty may be imposed upon the assessee for one or more of the faults, and up to a sum indicated in the respective sections. The officers specified in respective sections will exercise jurisdiction to levy it only when the proceedings are before them.
• The following dicta has been laid down by the Supreme Court in the Hindustan Steel (83 ITR 26) case:
1. A proceeding for the levy of a penalty for a statutory offence is a quasi criminal proceeding.
2. Penalty will not ordinarily be imposed unless the party acted (i) deliberately in defiance of law; or (ii) was guilty of conduct contumacious or dishonest; or (iii) acted in disregard of its obligation,
3. Penalty will not be imposed merely because it is lawful to do so.
4. Even though there is a prescription for a minimum penalty, the executive may not levy any penalty if the breach is technical, venial or if the breach flows from a bonafied belief that the offender is not liable to act in the manner prescribed,
5. Whether penalty should be imposed for a statutory offence is a matter of discretion of authority to be exercised judicially and on a consideration of all relevant circumstances.