Penalty under tax provisions requires correct statutory basis and proof of mala fides; deletion upheld for the assessee.

Penalty was not sustainable where the assessee's accounts were found to be incorrect, because section 12(5) applied only when the accounts were correct but the return was incorrect. Any levy, if at all, could arise only under section 12(3), but that provision required proof of mala fides, which was not established. The Tribunal's deletion of penalty was therefore upheld, and the revision was dismissed in favour of the assessee.

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Issues: Whether penalty was exigible on the facts under section 12(3) or section 12(5) of the Act.

Analysis: The accounts maintained by the assessee were found to be incorrect. Penalty under section 12(5) was not attracted because that provision applies where the accounts are correct but the return is incorrect. If penalty was to be levied at all, it could be considered only under section 12(3), but that provision required mala fides to be established. No mala fides was shown on the assessee's part.

Conclusion: Penalty was not exigible under either provision, and the Tribunal's deletion of the penalty was upheld in favour of the assessee.

Final Conclusion: The revision was dismissed and the order deleting the penalty was left undisturbed.

Ratio Decidendi: Penalty cannot be sustained under section 12(3) absent proof of mala fides, and section 12(5) applies only where the accounts are correct but the return is incorrect.

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