1996 (1) TMI 92 - HC - Income Tax

Summary

Issues:
Whether penalty is leviable on a registered firm under section 271(1)(a) of the Income-tax Act, 1961, when the advance tax paid exceeds the assessed tax on the registered firm.

Analysis:
The judgment pertains to a case where the Income-tax Appellate Tribunal referred a question of law to the High Court regarding the levy of penalty on a registered firm. The assessee, a registered firm, filed its income tax return for the assessment year with a delay of 13 months. The Income-tax Officer imposed a penalty of Rs. 8,690 treating the firm as unregistered under section 271(2) of the Act due to the delay. The firm contended that as the advance tax paid was more than the assessed tax, no penalty should be levied. The Commissioner of Income-tax (Appeals) upheld the penalty, but the Tribunal ruled in favor of the firm, leading to the reference of the question to the High Court.

The High Court referred to precedents such as P. Venkata Krishnayya Naidu and Son v. CIT, CIT v. Maskara Tea Estate, and Addl. CIT v. Murugan Timber Depot to support its decision. These cases established that if the advance tax paid exceeds the tax payable, no penalty should be imposed. The court noted that the penalty was levied under section 271(1)(a) of the Act, which required payment of a sum as penalty in addition to the tax payable. As no tax was outstanding, the penalty provision was not applicable. The court also found the application of section 271(2) of the Act to be improper.

After considering the question and relevant legal provisions, the High Court concurred with the Tribunal's view that no penalty should be levied on the registered firm. Consequently, the court ruled in favor of the assessee and against the Revenue. The judgment highlighted the omission of the penalty provision by the Direct Tax Laws (Amendment) Act, 1989, and emphasized the inapplicability of section 271(2) in this case. The court directed the transmission of the order to the Tribunal and made no orders as to costs, setting the counsel fee at Rs. 750 for each side if certified.