Technical default in advance-tax payment justified only nominal penalty where the breach was venial and justice required reduction.

Penalty for non-payment of an advance-tax instalment under section 221 of the Income-tax Act, 1961 was treated as a technical default rather than a grave breach. The assessee remained in technical default despite pending rectification proceedings and the possibility that little or no advance tax was ultimately payable, but the surrounding facts showed no serious arrears and the receipt of refunds. In penalty matters, a mere venial breach may justify a lesser punitive response where the ends of justice are met by a reduced amount. The penalty was therefore not sustained in full and was reduced to a nominal sum, granting only limited relief.

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Issues: Whether the penalty levied for non-payment of an advance-tax instalment under section 221 of the Income-tax Act, 1961 was justified, or whether the breach was only technical so as to warrant reduction of penalty.

Analysis: The assessee's default in paying the instalment within time technically remained, notwithstanding pending rectification proceedings and the possibility that no substantial advance tax was ultimately payable. The circumstances showed that the assessee was not in serious arrears and had received refunds, so the breach was not of a grave character. In penalty matters, a mere technical or venial breach does not necessarily justify the full penalty where the ends of justice can be met by a lesser amount.

Conclusion: The penalty was not sustained in full and was reduced to a nominal amount, resulting in partial relief to the assessee.

Final Conclusion: The order retaining the penalty was modified by reducing the quantum of penalty, and the appeal succeeded only to that limited extent.

Ratio Decidendi: Where the default is technical and the circumstances do not call for a full punitive response, penalty may be reduced to a token amount in the interests of justice.

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