Technical default without tax evasion intent cannot sustain penalty where transactions were duly recorded in the books.

Penalty under the U.P. Trade Tax Act was held unsustainable where the only default was non-submission of the required form and the transactions were otherwise fully reflected in the books of account. The HC held that penalty for breach of a statutory obligation is not automatic and requires some deliberate defiance, contumacious conduct, dishonest intention, or conscious disregard of the law. On the admitted facts, the revenue failed to establish any intention to evade tax, so the breach was treated as merely technical and venial. The penalty order and its affirmance by the Tribunal were set aside.

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Issues: Whether penalty under Section 15-A(1)(o) of the U.P. Trade Tax Act, 1948 was justified when the omission was only a technical defect and the transactions were duly reflected in the books of account, with no intention to evade tax.

Analysis: Penalty for breach of a statutory obligation is not automatic and, in the absence of deliberate defiance of law, contumacious conduct, dishonest intention, or conscious disregard of the obligation, it is ordinarily not imposed. Where the books of account disclosed the transactions and the default consisted only of non-submission of the required form, the breach was treated as technical and venial rather than indicative of tax evasion. On the admitted facts, the revenue could not establish any intention to evade liability.

Conclusion: The penalty was not justified and the revisionist succeeded on this issue.

Final Conclusion: The order imposing penalty and its confirmation by the Tribunal were set aside, and the revision was allowed.

Ratio Decidendi: Penalty for a statutory breach cannot be sustained where the default is merely technical and there is no deliberate, contumacious, or dishonest intention to evade tax.

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