1996 (12) TMI 133 - AT - Income Tax

Summary

Issues Involved:
1. Liability of a registered firm to pay penalty under section 271(1)(a), read with section 271(2) of the Income-tax Act, 1961.
2. Applicability of the Supreme Court decision in Ganesh Dass Sreeram to the present case.
3. Binding nature of the Full Bench decision of the Patna High Court in Jamunadas Munnalal.

Detailed Analysis:

1. Liability of a Registered Firm to Pay Penalty Under Section 271(1)(a), Read with Section 271(2):
The core issue was whether the assessee, a registered firm, was liable to pay penalty under section 271(1)(a) read with section 271(2) of the Income-tax Act, 1961, despite the tax deducted at source exceeding the tax payable as a registered firm. The Tribunal initially allowed the Revenue's appeal, relying on the Full Bench decision of the Hon'ble Patna High Court in Jamunadas Munnalal, which held that a registered firm is liable to pay penalty calculated on the basis of tax on an unregistered firm, notwithstanding the payment of advance tax covering the entire tax liability as a registered firm.

2. Applicability of the Supreme Court Decision in Ganesh Dass Sreeram:
The Tribunal considered the Supreme Court's decision in Ganesh Dass Sreeram, which held that where the advance tax paid covers the entire amount of tax assessed, there is no question of charging the registered firm with interest for late filing of returns. However, the Tribunal distinguished this decision, noting that it pertained to interest under section 139(8), which does not have a corresponding provision to section 271(2) for the levy of penalty. The Tribunal maintained that the penalty was leviable, reversing the CIT(A)'s order that had canceled the penalty by relying on Ganesh Dass Sreeram.

3. Binding Nature of the Full Bench Decision of the Patna High Court in Jamunadas Munnalal:
The Tribunal was bound by the Full Bench decision of the Patna High Court in Jamunadas Munnalal, which had not considered the Supreme Court's ruling in Ganesh Dass Sreeram. The Tribunal's decision to follow the jurisdictional High Court's ruling led to the rejection of the reference application by the Judicial Member, despite strenuous efforts by the assessee's counsel to argue otherwise. The Accountant Member, however, opined that the matter deserved reference to the High Court, especially in light of the divergence of opinions among different High Courts and the subsequent decision of the Patna High Court in CIT v. Jindal Bros., which acknowledged that the Supreme Court's ruling in Ganesh Dass Sreeram had effectively overruled Jamunadas Munnalal.

Third Member's Order:
The Third Member, addressing the difference of opinion, agreed with the Accountant Member that the reference to the High Court should be granted. The Third Member highlighted the recent judgment in CIT v. Jindal Bros., where the Patna High Court recognized that the Supreme Court's decision in Ganesh Dass Sreeram had overruled the Full Bench decision in Jamunadas Munnalal. Consequently, the Third Member directed that the matter should be referred back to the Division Bench to follow the majority view, thus supporting the stance that the reference should be made to the High Court under section 256(1).

Conclusion:
The Tribunal's final decision was to refer the question of law to the High Court for its esteemed opinion, recognizing the Supreme Court's ruling in Ganesh Dass Sreeram as the prevailing authority over the Full Bench decision of the Patna High Court in Jamunadas Munnalal. This decision underscores the importance of adhering to the latest and highest judicial pronouncements in resolving legal controversies.