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Issues: Jurisdiction of Inspecting Assistant Commissioner to impose penalty under section 271 of the Income-tax Act.
Analysis: The judgment issued by the High Court of Calcutta involved a writ petition filed by a partnership firm challenging the imposition of penalty by the Inspecting Assistant Commissioner of Income-tax for failure to furnish returns within the specified time. The petitioner argued that the Inspecting Assistant Commissioner lacked the authority to initiate penalty proceedings under section 271 of the Income-tax Act without proper jurisdiction. The petitioner contended that the authority granted to the Inspecting Assistant Commissioner by the Commissioner of Income-tax was limited to making assessments and did not extend to imposing penalties. The petitioner also raised the issue that the penalty imposed was excessive and illegal as the tax paid by the partner was not considered before the penalty notice was issued. The petitioner's counsel cited a decision by the Supreme Court of India in CIT v. M. Chandra Sekhar [1985] 151 ITR 433, emphasizing that when the Income-tax Officer extends the date for furnishing a return, the additional time granted is considered part of the time allowed for filing the return. Therefore, penalties under section 271 do not apply during the extended period. The court noted that the petitioner had paid all income tax dues and that the grievance was solely against the imposition of penalties. After considering the arguments presented by both parties, the court concluded that the Inspecting Assistant Commissioner did not have the jurisdiction to impose penalties in this case. The court held that since the time for filing the return was extended and the assessed amount was paid within that extended time, there was no basis for further penalty demands. Consequently, the court granted partial relief to the petitioner, directing the respondents to withdraw the notice of demand for penalty for the relevant assessment years. The court disposed of the rule accordingly, allowing the writ petition in part and vacating any interim orders, with no costs awarded.
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