1994 (1) TMI 61 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of section 271(1)(a) penalty on a registered firm for late filing of income tax returns.
2. Interpretation of "assessed tax" under section 271(1)(a)(i)(b) and its implications on penalty imposition.
3. Relevance of advance tax payments in determining penalty liability.
4. Validity of the Tribunal's direction to consider tax payable by the assessee as a registered firm.

Issue-wise Detailed Analysis:

1. Applicability of section 271(1)(a) penalty on a registered firm for late filing of income tax returns:
The primary question was whether a registered firm could be penalized under section 271(1)(a) for failing to file returns within the prescribed time, even if the advance tax paid exceeded the tax determined on regular assessment. The Tribunal had directed the Income-tax Officer to consider only the tax payable by the assessee as a registered firm and to cancel the penalty if no additional tax was due after regular assessment.

2. Interpretation of "assessed tax" under section 271(1)(a)(i)(b) and its implications on penalty imposition:
Section 271(1)(a)(i)(b) specifies that the penalty for delayed filing of returns is calculated as a sum equal to two percent of the "assessed tax" for each month of default. The Explanation to this section defines "assessed tax" as the tax reduced by amounts deducted at source or paid in advance. If the advance tax paid exceeds the tax determined on regular assessment, the "assessed tax" becomes zero, leading to zero penalty.

3. Relevance of advance tax payments in determining penalty liability:
The Supreme Court's decision in Ganesh Dass Sreeram v. ITO [1988] 169 ITR 221 was pivotal. It established that if the advance tax paid by a registered firm covers the entire assessed tax, no penalty for late filing is applicable. This principle was reinforced by multiple High Courts, including Andhra Pradesh, Rajasthan, and Punjab and Haryana, which held that no penalty is leviable if the advance tax paid equals or exceeds the assessed tax.

4. Validity of the Tribunal's direction to consider tax payable by the assessee as a registered firm:
The Tribunal's direction was validated by the court. The court found that the Tribunal correctly applied the principles from Ganesh Dass Sreeram and other relevant judgments. The Tribunal's directive to cancel the penalty if no additional tax was due after regular assessment was upheld. The court distinguished this case from CIT v. Priya Gopal Bishoyee [1981] 127 ITR 778, where the penalty was imposed because the assessed tax was a positive figure and was paid after the regular assessment.

Conclusion:
The court answered the question in the affirmative, supporting the Tribunal's decision. The ruling emphasized that no penalty under section 271(1)(a) could be levied if the advance tax paid by a registered firm exceeded the tax determined on regular assessment. The judgment underscored the importance of considering advance tax payments in determining penalty liability and upheld the Tribunal's direction to assess tax payable by the assessee as a registered firm.