In Brief
The Trustees of H.C. Dhanda Trust executed a Deed of Assent transferring property to beneficiaries with minimal stamp duty (Rs. 200/-). The Collector of Stamps classified it as a gift deed, found a deficiency of Rs. 1,28,09,700/-, and imposed the maximum penalty of ten times (Rs. 12,80,97,000/-) under Section 40 of the Indian Stamp Act, 1899. The Supreme Court held that while the deficiency assessment was justified due to intention to evade duty, the maximum penalty was excessive. The Court reduced the penalty to five times (Rs. 6,40,48,500/-), establishing that extreme penalties must only be imposed in genuinely extreme cases and require reasoned exercise of discretion, not automatic imposition. The discretion vested in Collectors must be fair and proportionate to the circumstances."
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