The imposition of penalty under Section 271b of the Income-tax Act, 1961, is not mandatory but discretionary. The taxing authority has the discretion to not impose the penalty if they are satisfied that there was sufficient ground for not imposing the penalty.

( 1 ) THE question referred to this court for answer is as follows :"whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in cancelling the penalty imposed under Section 271b of the Act on the ground that there was no absolute default on the part of the assessee to get the accounts audited ?"

( 2 ) MR. Mihir Lal Bhattacharjee, learned senior counsel for the assessee, had pointed out that though the learned Tribunal had rejected the assessee's explanation with regard to the reasonable cause for default contemplated under Section 271b in respect of furnishing the audited accounts required under Section 44ab, it is a quasi-criminal matter as was held in the case of CIT v. Anwar Ali, therefore, according to him, the default does not automatically attract the mischief of penalty in view of the changed proposition of law now prevailing and accepted by the Supreme Court and various other High Courts. He relied on the decisions in CIT v. ASK Enterprises [1998] 230 ITR 48 (Bom); CIT v. Vegetable Products Ltd. ; Calcom Electronics ltd. v. Sales Tax Officer [2001] 121 STC 600 (Delhi) ; Mysore Minerals Ltd. v. CIT ; Rupa Ashok Hurra v. Ashok Hurra ; CIT v. Jai Durga Construction Co. and Cemento Corporation Ltd. v. CCE. Relying on these decisions, he contended that the expression "may" employed in Section 271b is not mandatory but discretionary. It is not an absolute proposition that rejection of reasonable cause would definitely result in the imposition of penalty. According to him, by reason of Section 273b, the Legislature had intended that the imposition of penalty would not be an absolute proposition.

( 3 ) MR. Dipak Deb, learned counsel appearing on behalf of the Department, on the other hand, contends that the statute has to be interpreted in the manner it has expressed its intention. Neither the Tribunal nor the court can interpret an enactment in a manner different from the way it is expressed by the Legislature through express language "employed" therein. According to him, once the explanation is rejected, in a reference, there is no scope for interfering with the same and then there is no discretion left with the authority but to impose penalty. The absence of absolute default is something, which cannot be reconciled with the provisions of the statute. In order to show that once there is a default, the imposition of penalty is inevitable, he relied on the decisions in CIT (Addl.) v. Jeevan Lal Sah ; CIT v. Mussadilal Ram Bharose ; CIT v. K. R. Sadayappan ; B. A. Balasubramaniam and Bros. Co. v. CIT ; Maya Rani Punj v. CIT ; CIT v. Kil Kotagiri Tea and Coffee Estates Ltd. [1989] 177 ITR 458 (Ker) and CIT v. Ramkrishna Stores and on a passage from the Income-tax Law by Chaturvedi and Pithisaria, fifth edition, page 8663.

( 4 ) IN reply, Mr. Bhattacharjee had relied on an unreported decision in Pawan Kumar Agarwal v. CIT-W. P. T. T. No. 19 of 2000 disposed of by a Division Bench presided over by the hon'ble Mr. Justice Tarun Chatterjee as his Lordship then was and the hon'ble Mr. Justice S. P. Talukdar of this court on July 24, 2002, and contended that the law has undergone a change with regard to the imposition of penalty. Unless it is shown that there is deliberate and wilful violation and that the Revenue has suffered in consequence of such violation, no penalty can be imposed. It is not an absolute proposition for imposing penalty.

( 5 ) THE propositions of law enunciated by the respective counsel are already well-settled. But such proposition is applicable in given facts. Section 44ab requires an assessee to get his accounts audited within the stipulated time, which, in this case, expired on June 30, 1987. The assessee had submitted the audited accounts on December 4, 1989, long after the expiry of the period, but admittedly before the assessment was complete. Section 271b inserted with effect from April 1, 1985, began with the phrase. "if any person fails without r