2004 (7) TMI 29 - HC - Income Tax

Power of tribunal to reduce penalty u/s 271(1)(a) below the minimum - (i) Whether Tribunal was in law competent to reduce the penalty u/s 271(1)(a) to a figure lower than the sum equal to two per cent, of the tax for every month during which the default continued but not exceeding in the aggregate 50 per cent, of the tax? (ii) Whether, Tribunal was competent to reduce the quantum of penalty below the minimum prescribed in section 271(1)(a)? Held that it is not open to the Tribunal to reduce the penalty imposed under section 271(1)(a) of the Act to any thing lower than the sum equal to two per cent, of the tax assessed for every month during which the default continued both questions are answered in the negative, i.e., in favour of the Revenue

Summary

Issues:
1. Competency of the Tribunal to reduce penalty under section 271(1)(a) below the prescribed limit.
2. Competency of the Tribunal to reduce penalty below the minimum prescribed in section 271(1)(a) of the Income-tax Act, 1961.

Analysis:
1. The case involved the Tribunal being questioned on its authority to lower the penalty under section 271(1)(a) of the Income-tax Act, 1961. The respondent-assessee, an individual, was asked to file a return for the assessment year 1948-49 by a certain date but submitted it late. The Income-tax Officer imposed a penalty of Rs. 51,148.00 under section 271(1)(a) for the delay. The Appellate Assistant Commissioner upheld the penalty, leading the respondent to appeal to the Tribunal. Despite finding no reasonable cause for the delay, the Tribunal reduced the penalty to Rs. 2,000 as a symbolic amount for the sake of justice.

2. The Revenue argued that the law sets specific limits on penalties that can be imposed, and authorities cannot go below the minimum prescribed by the Act. Citing various legal precedents, including decisions by different High Courts and the Supreme Court, the Revenue contended that the Tribunal does not have the power to reduce penalties below the statutory limits. The High Court agreed with the Revenue's position, emphasizing that the Tribunal was not justified in lowering the penalty below the minimum prescribed in section 271(1)(a) of the Act.

In conclusion, the High Court ruled in favor of the Revenue, answering both questions of law in the negative, against the respondent-assessee. The judgment highlighted the importance of adhering to the prescribed penalty limits set by the Income-tax Act, emphasizing that authorities, including the Tribunal, must impose penalties as per the statutory provisions without going below the minimum thresholds.