Wow! When did feeling bad or sad become a crime? How can we ever determine if a child feels bad because of their behavior or the discipline imposed? Maybe we shouldn't hold kids responsible for their behaviors if the discipline might make them feel bad. How did we as a society get to the point of making 'discipline' a bad word?
Just because a parent chooses not to punish does not mean they do not believe in discipline. Getting to the root of the issue by gently helping your child understand the situation IS discipline. In fact, it teaches REAL discipline, meaning it makes them want to do better, not just avoid punishment.
There are many, many people in our society who do unsavory things and don't think a thing of it because they know they won't get caught. Look at the phenomenon of freely ridiculing people on the Internet, such as taking photos of them without their knowledge and then making fun of them on social media. Those folks don't think about the fact that what they are doing is wrong. It's not even a consideration because they can't get caught. THIS is what our society has become.
I want my child to do the right thing because he wants to. Not because he fears getting caught. I want him to be kind and empathetic. I want him to consider others even if he doesn't know them. The best way I can do this is by treating him this way. It's not about letting him do whatever he wants. It's about teaching him to genuinely want to do the right thing. I try to always treat him with respect and not use manipulation. That's what everyone wants, why should he be any different?
What's really getting to me about this, is that the OP's child may really have something going on that needs attention. Her child has displayed a behavior that is not typical for a kid her age. If all that happens is the child gets punished with a time-out or whatever then something very important could be getting missed. This child needs to be heard. Maybe it's nothing and maybe it's a cry for help. It's not about being "right" or having "control". It's about the welfare of the child.