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Calculation of penalty for late filing of return based on difference in first assessment and assessment on reopening. Analysis: The case involved a dispute regarding the computation of penalty for late filing of a return under section 271(1)(a) of the Income-tax Act, 1961. The Commissioner of Income-tax, Gujarat Central, moved the Income-tax Appellate Tribunal for reference to the High Court. The Tribunal referred the question of law concerning the penalty calculation to the High Court. The assessee filed the return on time, but the assessment was later reopened, causing a delay in filing the revised return. The Income-tax Officer imposed a penalty based on the entire assessed tax from the time of the first return. However, the Tribunal held that the penalty should be computed based on the difference between the first assessment and the assessment on reopening, using the assessed tax on reopening as the basis for calculation. The relevant provision, section 271(1)(a) of the Income-tax Act, empowers the Income-tax Officer to levy a penalty if a person fails to furnish the return of total income without reasonable cause. The section specifies that the penalty can be a sum equal to two percent of the assessed tax for every month during which the default continued. The term "assessed tax" is defined as the tax reduced by the sum deducted at source or paid in advance. The Commissioner of Income-tax (Appeals) determined that the penalty should be calculated based on the total tax payable, considering deductions made at source and tax paid in advance. The High Court agreed with the Tribunal's interpretation of section 271(1)(a) and the calculation of penalty based on the assessed tax difference between the first assessment and the assessment on reopening. The Court held that the penalty should be two percent of the assessed tax for each month of default, calculated according to the Tribunal's method. Therefore, the Court ruled in favor of the assessee and against the Revenue, affirming the Tribunal's decision on the penalty calculation issue.
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