1981 (2) TMI 54 - HC - Income Tax

Summary

Issues:
- Imposition of penalty under section 271(1)(a) for late filing of return
- Applicability of penalty provisions of the 1961 Act over the 1922 Act
- Whether penalty can be imposed when no tax is payable by the assessee

Analysis:

The case involved a reference regarding the imposition of a penalty under section 271(1)(a) of the Income Tax Act for late filing of a return for the assessment year 1961-62. The assessee, a registered firm running a restaurant and hotel, had delayed filing the return by fifty months, resulting in a penalty of Rs. 44,272. The Tribunal upheld the penalty, rejecting the assessee's arguments. The Tribunal found that the complexity of operations did not justify the delay and that the assessee had not sought an extension of time. The Tribunal also dismissed the argument that the penalty should be imposed under the provisions of the 1922 Act instead of the 1961 Act.

Furthermore, the Tribunal rejected the contention that no penalty was imposable when no tax was payable by the assessee at the time of penalty imposition. The Tribunal reasoned that allowing such an argument would lead to absurd results, where an assessee could avoid penalties by paying taxes immediately after receiving a penalty notice. The Tribunal held that the liability to pay the penalty arose during the default period and was determined when the default ended, irrespective of the tax payment timing.

The assessee raised questions regarding the justification of penalty imposition under the 1961 Act for a default under the 1922 Act and whether the penalty was justified when no tax liability was outstanding at the penalty imposition date. The Tribunal referred only the latter question to the High Court, as the former was deemed self-evident based on a previous Supreme Court decision. The High Court analyzed the relevant provisions of the 1961 Act, particularly section 271(1)(a), and concluded that the penalty imposed on the assessee was in accordance with the law. The court emphasized that the subsequent tax payment did not negate the penalty for the earlier default in filing the return.

In conclusion, the High Court held that the penalty levied on the assessee was justified under the provisions of the 1961 Act. The court answered the question in the negative, in favor of the revenue, allowing the revenue to claim costs. The court's decision highlighted that the penalty for late filing of the return was valid, regardless of the subsequent tax payment by the assessee.