Penalty for excess tax collection requires consideration of bona fide rate dispute and surrounding circumstances before imposition.

Penalty for excess collection of tax was not automatic on a technical breach; the authority had to consider the surrounding circumstances before levying it. Because the tax rate had initially been accepted at four per cent and was later reduced on appeal to two per cent, there was a bona fide dispute about the applicable rate, which required factual scrutiny before imposing penalty equal to the excess collection. The penalty orders were therefore liable to be quashed, and the assessee succeeded on this ground.

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Issues: Whether penalty for excess collection of tax under section 18-A could be imposed without considering the surrounding circumstances, particularly where there was a bona fide doubt as to the rate of tax chargeable and the assessee had collected tax at a rate initially accepted by the assessing authority.

Analysis: Penalty under section 18-A was not automatic upon a technical contravention of section 18. The authority imposing penalty was required to consider the circumstances in which the collection had been made. Here, the rate of tax was initially taken at four per cent by the assessing authority itself, and only later reduced on appeal to two per cent. That background showed a bona fide dispute as to the applicable rate and made it necessary to examine the facts before fastening penalty equal to the excess collection. The challenge to the penalty therefore succeeded on this ground, and the other contention was left open.

Conclusion: Penalty could not be straightaway levied without consideration of the circumstances of collection; the impugned penalty orders were liable to be quashed. The decision is in favour of the assessee.

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