Securities Transaction Tax penalty requires proof of no reasonable cause; statutory safeguards prevent automatic punishment.

Penalty for failure to collect or remit Securities Transaction Tax is not automatic; it depends on the statutory conditions for imposition being satisfied. Section 105 of the Finance (No. 2) Act, 2004 creates the penalty liability, but Section 108 overrides that provision and requires a reasonable opportunity of hearing, along with failure by the assessee to prove reasonable cause for the default. Because penalty is punitive in nature, the assessee's conduct and surrounding circumstances must be separately considered. On the stated facts, those statutory conditions were not met, and the penalty was rightly deleted.

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Issues: Whether the penalty levied for failure to collect or remit Securities Transaction Tax could be sustained in view of the statutory protection against penalty where reasonable cause is shown.

Analysis: Section 105 of the Finance (No.2) Act, 2004 creates liability to penalty for failure to collect or pay Securities Transaction Tax. Section 108 of the same Act begins with a non obstante clause and overrides the penalty provisions, making penalty contingent upon the assessee being given a reasonable opportunity of hearing and failing to prove reasonable cause for the default. Penalty is punitive in nature and is not an automatic consequence of every infraction; it requires a separate consideration of the circumstances and the conduct of the assessee.

Conclusion: The penalty was rightly deleted, as the statutory conditions for its imposition were not satisfied.

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