1978 (3) TMI 61 - HC - Income Tax

Summary

Issues:
1. Imposition of penalty under section 271(1)(a) on a partner of a registered firm.
2. Quantum of penalty under section 271(1)(a) for late filing of return in response to a notice under section 22(2) of the Indian Income Tax Act, 1922.

Analysis:
Issue 1: The judgment addressed whether a penalty under section 271(1)(a) of the Income Tax Act, 1961, could be imposed on a partner of a registered firm who was also subjected to a separate penalty under the same section. The court examined the distinct entities of a firm and its partners for income tax purposes. It highlighted that both the firm and individual partners are obligated to file returns separately. The court rejected the argument that the partner's liability to file a return is contingent upon the firm's registration status. It emphasized that even if the partner's share of profits is exempt from tax, a return must still be filed to determine the tax rate applicable to the partner's taxable income. The judgment concluded that the penalty on the partner was justified for non-compliance with the notice under section 22(2) of the 1922 Act.

Issue 2: The judgment also delved into the quantum of penalty under section 271(1)(a) for delayed filing of a return in response to a notice under section 22(2) of the Indian Income Tax Act, 1922. The court clarified that the fixed rate of penalty at two percent per month is not a maximum but a prescribed rate. It highlighted that the discretion of the assessing authority to levy or waive the penalty is subject to the prescribed rate. The court cited previous rulings to support the position that the penalty rate cannot be increased or reduced beyond the fixed rate. Therefore, it upheld the imposition of the penalty at the fixed rate of two percent per month for the delay in filing the return.

In conclusion, the court ruled in favor of the Commissioner of Income Tax, upholding the imposition of penalties on the partner of the registered firm. The judgment clarified the legal provisions regarding penalties under section 271(1)(a) and emphasized the distinct obligations of a firm and its partners under the Income Tax Act.