( 1 ) THE Commissioner of Income Tax (Appeal) deleted the penalty levied upon the assessee holding that since income from the sale of debentures for the previous assessment year had been treated as capital gains and taxed accordingly, the assessee had a bonafide belief that the same treatment may be given to the income for the year under consideration. For the assessment year under consideration the Assessing Officer had taken the view that income arising from the sale of debentures could be brought to tax as business income. The assessee had shown the income arising from the sale of debentures as capital gains relying upon the assessment for the previous year in which similar income had been so treated. The Commissioner was therefore of the view that change in the opinion by the Assessing Officer as regard the income being capital gains or business income could not make out a case for levy of a penalty upon the assessee. The Commissioner has relying upon the decision of the Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) deleted the penalty in the following words :-

THIS change of opinion is by itself not enough to justify the penalty. In Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) it was held that an order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceeding. Penalty will not be ordinarily imposed unless the party acted deliberately in definace of law or was guilty of dishonest conduct or acted in conscious disregard of its obligation. A penalty should not be imposed for a mere technical or venial breach of law. In Additional CIT vs. Kalyan Mal Mills Tent Factory 116 ITR 881 (MP) it was held that where the law authorises the authority to impose the penalty, the penalty could not be imposed without examining as to whether there was a deliberate defiance of law or a conscious disregard of the obligations. The penalty should not be imposed because it was lawful to do so or because there was any technical or venial breach of law. The AO has not brought on record any fact or evidence to show such contumacious conduct of the appellant. The appellant could have honestly believed that the income was taxable as capital gains.

( 2 ) THE Tribunal has affirmed the above line of reasoning and concluded that since the gains arising under identical circumstances had been treated as capital gains by the Assessing Officer, the assessee was under a bonafide belief that for the assessment year under consideration a similar treatment would be given to the said income. The Tribunal has in this connection observed as under :-

WE have duly considered the rival contentions and the material on record. We have perused the assessment order for assessment year 1995-96. We find that gains arising under identical circumstances have been treated as capital gains by the Assessing Officer. Therefore, the assessee was under a bonafide belief that this year also the same treatment should be given. But the Assessing officer thought otherwise and changed his stand. We fail to understand where the assessee went wrong. We are not commenting on whether the gains should be treated as capital gains or as business income. But we are on the issue as to how the assessee can be faulted because of the change of opinion on the part of the Assessing officer, particularly when the assessee had made full disclosure of all the facts. The decisions relied upon by the learned counsel are applicable to the facts of the case and accordingly, we uphold the order of the CIT (Appeals) canceling the penalty.

( 3 ) ON the findings recorded by the Commissioner and the Tribunal it is evident that the assessee was under a bonafide belief that income arising out of the sale of debentures was taxable as capital gains and not as business income. That finding of fact does not in our view give rise to a substantial question of law to warrant our intervention.

( 4 ) MR. Joll