1977 (1) TMI 27 - HC - Income Tax

Summary

Issues:
1. Whether penalty could be levied for the belated filing of the return by a registered firm that has paid the entire tax payable before the date of imposition of penalty despite the provisions of section 271(2)?
2. Whether no penalty under section 271(1)(a) was leviable on the assessee as no tax was due from it on the date of imposition of penalty?

Analysis:
Issue 1:
The case involved the question of whether a penalty could be imposed on a registered firm for filing the return belatedly, even if the entire tax payable was paid before the penalty imposition date. The assessee firm filed the return after the due date, and the Income-tax Officer initiated penalty proceedings under section 271(1)(a). The Appellate Tribunal, relying on a Supreme Court judgment, held that no penalty was leviable as no tax was payable by the assessee on the penalty imposition date. However, subsequent retrospective amendment clarified that penalty should be calculated based on the assessed tax, irrespective of the tax being due on the penalty imposition date. Therefore, the court concluded that the penalty was imposable on the assessee, contrary to the Tribunal's decision.

Issue 2:
The second issue revolved around the applicability of section 271(2) in determining the penalty for a registered firm. The counsel for the assessee argued that no penalty could be imposed under section 271(1)(a) read with section 271(2) as there was no assessed tax for a registered firm. However, the court clarified that section 271(2) dealt with the quantum of penalty for registered firms and created a fiction treating them as unregistered firms for penalty calculation purposes. The court emphasized that section 271(2) focused on quantification rather than the liability to pay, and thus, the argument against penalty imposition based on section 271(2) was deemed invalid.

In conclusion, the court held that the penalty was imposable on the assessee and directed the Tribunal to determine the quantum of penalty under section 271(1) read with section 271(2) of the Income-tax Act. The court left the question regarding the penalty quantum unanswered in one of the cases and decided against the assessee in the other case. No costs were awarded in either reference.