Suhas Chandra Sen, J.
1. The Commissioner of Income-tax applied to the Tribunal for referring three questions of law under Section 256(1) of the I.T. Act, 1961. The Tribunal referred only the following question to this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no penalty under Section 140A(3) was leviable ?'
2. An order of penalty was passed by the ITO on the ground that the assessee did not pay tax on the basis of the returned income within the due date, A sum of Rs. 25,000 was charged as penalty under Section 140A(3) of the I.T, Act. The AAC in appeal upheld the order of the ITO. The Tribunal, however, held that the imposition of penalty for failure to perform a statutory obligation is a matter of discretion which has to be exercised judicially. For this proposition, the Tribunal relied on the judgment of the Supreme Court in the case of Hindustan Steel Ltd. : 83ITR26(SC) , and following that judgment, the Tribunal held that the authority competent to impose penalty will be justified in refusing to impose the minimum penalty when there is technical or venial breach of provisions of the Act. The Tribunal found that due to paucity of funds, the assessee could not pay the tax. The Tribunal also held that the ITO had not given any reason for imposing penalty. Even if there was a default, the ITO was bound to consider the circumstances of the case and give his reasons why the penalty should be imposed. The Tribunal, on a review of the facts and circumstances of the case, held that no penalty was leviable.
3. We do not find any legal infirmity in the order of the Tribunal. The question, therefore, is answered in the affirmative and in favour of the assessee.
4. There will be no order as to costs.