Tax deduction at source penalty not leviable where tax was already realised and no mala fide intent was found.

Penalty for failure to deduct tax at source was held not leviable where the contractor's tax liability had already been assessed and realised, so the revenue objective behind deduction at source was fully achieved. The applicant was an educational institution, the construction work was funded by the State Government, and the explanation that it was unaware of the deduction requirement was found plausible. In the absence of mala fide intention, continuation of penalty proceedings was considered unnecessary and productive of avoidable litigation and financial loss to the Government.

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Issues: Whether penalty under Section 8(D)(6) of the U.P. Trade Tax Act, 1948 was justified in the facts of the case.

Analysis: The revisionist was an educational institution and the construction work was funded by the State Government. The contractor had already been assessed and tax liability had been created and realised, so the revenue objective behind tax deduction at source had been achieved. In these circumstances, continuation of penalty proceedings served no useful purpose and only caused avoidable litigation and financial loss to the Government. The explanation that the revisionist was not aware of the deduction requirement was found to be plausible, and no mala fide intention was found.

Conclusion: Penalty under Section 8(D)(6) was not leviable, and the revision was allowed in favour of the assessee.

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