Penalty cannot be levied by the Tax Authorities for Minor Breach or Procedural Requirements. Section 126 (1)
Let's decode Penalty provisions.
Minor Breach = Tax involved is less than Rs. 5,000/-
Other cases where penalty not leviable:
(i) Minor breach for Tax Regulations
(ii) Breach for Procedural Requirements
(iii) Omission of a mistake which can be easily rectified
(iv) Mistakes and Omissions without fraudulent intent or gross negligence
Rectifiable Mistake:
(i) It is made without fraudulent intent
(ii) It does not result from gross negligence
(iii) Such mistakes should be an error apparent on the face of record.
Penalty cannot be levied where a person voluntarily discloses the circumstances of a breach of the tax law, regulation or procedural requirement prior to discovery of the breach by the Tax Authority.
Penalty is not imposable when there is no loss of revenue to the Department. CEGAT Calcutta in Tata Engg. and Locomotive Co. Ltd. vs CCE (1994)
No Penalty was imposable, as no mala fide on part of assessee who entertained the reasonable belief that the value of material was not
required to be added in the value of services being provided by them. CESTAT Delhi in CCE, Chandigarh vs Satyam Digital Photo Lab (2012)
Penalty provisions should be interpreted as it stand, and in case of doubt, it should be interpreted in a manner favorable to the taxpayer.
Supreme Court in CIT vs Vegetable Products Ltd. (1973)
I hope you will find this discussion useful.
Abhishek Raja Ram
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Abhishek Raja "Ram"
@abhishekrajaram
MEC, STBA Delhi || Speaker and Author on GST. Life dedicated towards Tax and Economic Reforms & Simplification