1988 (6) TMI 64 - AT - Income Tax

Summary

Issues:
1. Penalty imposed on the assessee under section 273(2)(c) for failure to file statement of advance tax.
2. Interpretation of the word 'deductible' in section 209(1)(a)(iii) regarding tax deductible at source.
3. Applicability of penalty under section 273(1)(b) for failure to file advance tax statement.
4. Computation of penalty under section 273(1)(b) considering tax deductible at source under sections 194 and 195.

Detailed Analysis:
1. The issue in this case revolved around the penalty imposed on the assessee for not filing a statement of advance tax as required under section 209A(1)(a). The ITO initiated penalty proceedings under section 273(2)(c), but the CIT (A) observed that the penalty should have been imposed under section 273(1)(b) instead. The CIT (A) upheld the penalty, leading the assessee to appeal to the Tribunal.

2. The interpretation of the word 'deductible' in section 209(1)(a)(iii) was crucial in determining the assessee's obligation to file an advance tax statement. The CIT (A) held that the word 'deductible' should be construed broadly to include 'deducted.' Therefore, the CIT (A) concluded that unless tax was actually deducted and paid to the government, the benefit of section 209(1)(a)(iii) could not be availed of by the assessee.

3. The Tribunal agreed with the assessee's representative that tax deductible under sections 194 and 195 should be considered while computing advance tax and determining the assessed tax for penalty purposes under section 273(1)(b). The Tribunal also referred to a decision by the Madras High Court supporting this view. Ultimately, the Tribunal held that the assessee had an obligation to file an advance tax statement under section 209(1)(a) and upheld the penalty under section 273(1)(b).

4. In computing the penalty under section 273(1)(b), the Tribunal directed the ITO to consider the tax deductible at source under sections 194 and 195 for interest and dividend income. The Tribunal emphasized that the assessed tax should be determined after reducing the tax deductible under these sections. The penalty was to be recalculated at 10% of the shortfall after accounting for the tax deductible at source.

In conclusion, the Tribunal partially allowed the appeal, confirming the penalty under section 273(1)(b) but directing the ITO to recalculate the penalty amount by considering the tax deductible at source under sections 194 and 195.