Penalty for wrongly availed credit set aside where disclosure, prompt reversal, and no suppression showed absence of intent to evade.

Penalty was held unwarranted where the disputed credit had been disclosed in ER-1 returns, reversed with interest immediately after the irregularity was pointed out, and had been taken under a wrong impression of law. The disclosure and prompt reversal indicated no intention to evade duty, and there was no material to establish suppression of facts. On that basis, the foundation for penalty was not made out and the penalty was set aside.

---

---

Issues: Whether penalty was sustainable where the credit was disclosed in the returns, reversed with interest on being pointed out, and the availment was under a wrong impression of law.

Analysis: The appellant had shown the disputed credit in the ER-1 returns and had reversed it along with interest immediately after the irregularity was noticed. These circumstances indicated absence of any intention to evade duty. Since the availment was under a wrong impression of law and there was no material to establish suppression of facts, the foundation for imposing penalty was not made out.

Conclusion: The penalty was unwarranted and was set aside.

---