9911796707
|
Home
Issues:
Interpretation of penalty provisions under section 271(1)(c) of the Income Tax Act, 1961 regarding deduction of annuity deposit payable by the assessee-firm while calculating penalty. Analysis: The High Court was tasked with determining whether the Tribunal was correct in directing the deduction of annuity deposit payable by the assessee-firm while calculating the penalty under section 271(1)(c) for the assessment year 1965-66. The assessee, a registered firm involved in the sale of woollen goods and cloth manufacturing, had filed its return of income at Rs. 66,013, which was subsequently increased by the Income Tax Officer (ITO) to Rs. 1,63,977. The Appellate Assistant Commissioner (AAC) upheld some additions, resulting in an assessment of Rs. 1,13,997. Penalty proceedings were initiated under section 271(1)(c) by the ITO, leading to a penalty of Rs. 1,10,000 imposed by the Income-tax Appellate Tribunal, which was later reduced to 60% of the tax sought to be avoided. The Tribunal directed the deduction of annuity deposit payable by the firm while calculating the penalty, relying on section 271(2) and a decision of the Gujarat High Court in CIT v. Gujarat Automobiles [1976] 105 ITR 588. The key contention revolved around the interpretation of section 271(2) of the Income Tax Act, which treats a registered firm as an unregistered firm for penalty purposes. The Tribunal's decision was based on the premise that the amount of tax payable by the firm, if unregistered, should be considered, and in assessing this total income, the annuity deposit under section 280-O should be deducted. This approach was supported by various High Courts in subsequent cases, including the Karnataka High Court, Madras High Court, and Bombay High Court, which upheld a similar view as taken in the Gujarat Automobiles case. The High Court concurred with this interpretation, emphasizing the logical extension of the fiction introduced by section 271(2) to calculate penalty as if the firm were unregistered. In light of the consistent judicial interpretation and absence of contrary decisions presented by the Revenue, the High Court answered the question in favor of the assessee and against the Revenue. The judgment highlighted the application of legal fiction to ensure a comprehensive assessment of penalty under section 271(1)(c) by considering the annuity deposit payable by the firm as if it were unregistered. The agreement of both judges, M. M. Punchhi and Rajendra Nath Mittal, solidified the decision, leading to no order as to costs in the given circumstances.
|
