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Issues:
1. Penalty imposition for delayed filing of tax return. 2. Applicability of penalty under section 271(1)(i) and 271(1)(a) of the Income Tax Act, 1961. 3. Consideration of tax paid by partners in penalty determination. 4. Interpretation of "assessed tax" and "tax payable" under section 271(1)(i). 5. Application of the doctrine of mens rea in penalty proceedings. Analysis: The case involved a partnership firm that filed its tax return almost 11 months after the due date, leading to penalty proceedings initiated by the Income Tax Officer (ITO). The firm argued that since both the firm and its partners had paid advance tax and tax due on provisional assessment, no penalty should be imposed. However, the ITO imposed a penalty under section 271(1)(i) of the Income Tax Act, 1961. The Appellate Tribunal overturned this decision, considering the partners' tax payments as a relevant factor in penalty determination. The Revenue appealed, raising questions regarding the calculation of penalty based on tax payable and whether the firm had a reasonable cause for the delay. The Full Bench clarified that the doctrine of mens rea does not apply to penalty proceedings under section 271(1)(a) of the Act. Regarding the first question, the court relied on a previous decision to conclude that the amendment to section 271(1)(a)(i) replaced "tax payable" with "assessed tax," disallowing adjustment for tax paid under section 23B. Consequently, the Tribunal's finding that no penalty was due based on full tax payment was reversed. The assessed tax for the firm was calculated, and the court held that the firm was liable for penalty under section 271(1)(i). The court addressed conflicting views on whether a firm with nil assessed tax is liable for penalty. While some High Courts held that no penalty is due in such cases, the court emphasized that if the assessed tax is quantifiable, the firm is liable for penalty. As the firm in question had a calculable assessed tax, the court ruled that the firm was indeed liable for penalty under section 271(1)(i). The Tribunal's decision that no penalty was due despite the delay in filing the return was overturned, emphasizing the firm's liability for penalty under the circumstances. In conclusion, the court answered both questions against the assessee, upholding the imposition of penalty under section 271(1)(i) of the Income Tax Act, 1961. The judges unanimously agreed on the decision, affirming the firm's liability for the penalty due to the delayed filing of the tax return.
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