1987 (11) TMI 55 - HC - Income Tax

Summary

Issues:
Whether advance tax paid beyond the due date should be deducted from the tax payable for calculating the penalty under section 271(1)(a) of the Income-tax Act, 1961.

Analysis:
The case involved a question regarding the deduction of advance tax paid beyond the due date from the tax payable for calculating the penalty under section 271(1)(a) of the Income-tax Act, 1961. The assessee filed the return for the assessment year 1969-70 on April 8, 1970, instead of the due date of June 30, 1969. The assessee had paid advance tax of Rs. 12,940 on February 26, 1969. The penalty was levied under section 271(1)(a) for the late filing of the return, leading to the question of whether the advance tax should be deducted from the assessed tax for calculating the penalty. The contention was whether the advance tax paid should be deducted while determining the assessed tax as per the Explanation under section 271(1)(a).

The court analyzed Chapter XVII-C of the Income-tax Act, which provides for advance payment of tax. It was noted that advance tax is payable in instalments during the financial year, and if the advance tax paid exceeds the tax determined on regular assessment, interest is payable to the assessee. The court highlighted that the concept of advance tax is linked to the financial year relevant to the assessment year and not necessarily the previous year adopted by the assessee. The court emphasized that the penalty under section 271(1)(a) is calculated based on the tax assessed, with tax deducted at source and tax paid by way of advance being deducted from the assessed tax for penalty calculation.

The court held that all tax paid as advance tax during the relevant financial year should be deducted from the assessed tax for penalty calculation under section 271(1)(a). It was deemed reasonable to treat all tax paid as advance tax under Chapter XVII-C and deduct the same from the assessed tax as per the Explanation. The court concluded in favor of the assessee, stating that advance tax paid beyond the due date should be deducted from the tax payable for calculating the penalty under section 271(1)(a). The court did not find it necessary to refer to previous decisions cited by the counsels as they did not pertain to the specific Explanations discussed in this case.