1985 (5) TMI 4 - HC - Income Tax

Summary

Issues Involved:
1. Whether penalty under section 271(1)(a) could be imposed even after charging interest under section 139 for delayed submission of the return.
2. Whether, on the facts of the case, the penalty calculated on the basis of tax on an unregistered firm could be levied when no tax was payable by it as a registered firm.

Issue-wise Detailed Analysis:

Issue 1: Penalty under Section 271(1)(a) after Charging Interest under Section 139
The facts of the case reveal that the return for the assessment year 1967-68 was due on June 30, 1967, but was filed on September 3, 1968. The Income-tax Officer initiated penalty proceedings under section 271(1)(a) for delayed filing without reasonable cause. The assessee contended that since interest had been charged for the late filing, penalty should not be imposed, and presumed that the time for filing the return was extended. However, the Income-tax Officer imposed a penalty of Rs. 6,264, stating no application for extension was made and no reasonable cause for delay was shown.

The Appellate Assistant Commissioner upheld the penalty but modified the default period to start from August 16, 1967, due to a general extension granted. The Tribunal agreed with the lower authorities, asserting that charging interest under section 139 and imposing a penalty under section 271(1)(a) are independent provisions serving different purposes. Interest is charged for delay, while penalty is imposed for delay without reasonable cause.

The court referenced various decisions affirming that charging interest does not preclude imposing a penalty. Notably, the Supreme Court in CIT v. M. Chandra Sekhar [1985] 151 ITR 433 distinguished between returns filed under section 139(1) and 139(4), asserting no presumption of extension in cases under section 139(4). The court cited multiple High Court decisions supporting that penalties and interest serve distinct purposes and can be imposed cumulatively.

Conclusively, the court held that the Tribunal was justified in holding that penalty under section 271(1)(a) can be imposed even after charging interest under section 139 for delayed submission of the return.

Issue 2: Penalty Calculation on the Basis of Tax on an Unregistered Firm
The statement of facts indicated that the assessee paid advance tax of Rs. 3,500, while the assessed tax as a registered firm was Rs. 2,742. The assessee argued that since no tax was payable as a registered firm, penalty should not be calculated on the basis of tax as on an unregistered firm.

The Tribunal rejected this contention, stating that in cases of delay without reasonable cause, section 271(1)(a) mandates penalty calculation as if the firm were unregistered. The court referenced the Full Bench decision in Jamunadas Mannalal v. CIT [1985] 152 ITR 261, which upheld that penalty calculated on the basis of tax as on an unregistered firm could be levied even when no tax was payable by it as a registered firm.

Thus, the court held that on the facts of this case, penalty calculated on the basis of tax as on an unregistered firm could be levied when no tax was payable by it as a registered firm.

Conclusion
Both questions were answered in the affirmative, in favor of the Revenue and against the assessee. The court held that:
1. Penalty under section 271(1)(a) can be imposed even after charging interest under section 139 for delayed submission of the return.
2. Penalty calculated on the basis of tax as on an unregistered firm could be levied when no tax was payable by it as a registered firm.

No order as to costs was made.