Penalty for short delay in compulsory deposit is not automatic where sufficient cause and a venial default are shown.

Penalty under section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 was treated as not automatic on mere proof of a short delay in making the deposit. The Tribunal applied the principle that a penal provision should not operate mechanically and that the authority must consider whether the default was technical, venial, or otherwise supported by sufficient cause. It held that the hearing and appellate scheme would be undermined if penalty followed invariably, and accepted the assessee's explanation that the delay was small and caused by paucity of funds; penalty was therefore not exigible.

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Issues: Whether penalty under section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 was exigible for a short delay in making the compulsory deposit, or whether the assessee had shown sufficient cause to avoid penalty.

Analysis: The provisions of section 10, read with the appellate scheme in section 12, were treated as not creating an absolute obligation to levy penalty merely on proof of default. The reasoning followed the principle that a penal provision is not to be applied mechanically and that the authority must consider whether the default was technical, venial, or otherwise supported by sufficient cause. The Tribunal held that the opportunity of hearing under the provision would be rendered illusory if penalty had to follow automatically, and construed the provision reasonably and in consonance with justice. On the facts, the delay was small, caused by paucity of funds, and the explanation was accepted as adequate.

Conclusion: Penalty was not exigible and the assessee succeeded.

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