Amendment of provisions of s 271(1)(i),deletion of ss (2) of s274 of Income-tax Act, 1961. - Income Tax - 1037/CBDT

INSTRUCTION NO. 1037/CBDT Dated : February -1, 1977 Section(s) Referred: 18(1)(i) ,18(3) ,271(1)(i) ,274(2) , 17(1) and 17(3) of GT Act Statute: Income - Tax Act, 1961 The provisions of the Taxation Laws (Amendment) Act, 1075 which have come into force on 1-4-1976 have been explained in the Board's Circular No. 204** (F. NO. 132/5/76-TPL), dated 24-7-1976. Paras 61 and 65 of the said circular deal, inter alia with the effect of amendment of the provisions of section 271(1)(i) and deletion of sub-section (2) of section 274 of the Income-tax Act, 1961. 2. Under sub-clause (i) of sub-section (1) of section 271 (effective from 1-4-1975) penalty imposable for default u/s 271(1)(a) is a sum equal to two per cent of the assessed tax for every month during which the default continued. Unlike the earlier provisions, the new provision does not restrict the penalty imposable to 50% of the assessed tax. In para 61.13 of the Board's Circle No. 204 referred to above, it has been clarified that penalty u/s 271(1)(i) would be leviable according to the amended provisions in respect of cases where the default in filing the return occurred on or after 1-4-1976, that is to say, where the last date for filing the return expired on or after that date. However, the question of levy of penalty in cases where default in filing the returns had taken place prior to 1-4-1976 and continued after that date has been examined by the Board. The Board are of the view that the default in such cases is a continuing one, as the obligation to file the return continued, day after day, even after the expiry of the period laid down in the Act. The penalty has to be reckoned for every month during which the default continued. The new provisions would apply in relation to the period of the default after 31-3-1976. While the maximum penalty for the period of default upto 31-3-1976 would be restricted to 50% of the assessed tax, for the period of default after that date, further penalty is imposable without being subject to this restriction. 3. Sub-section (2) of section 274, as it stood prior to its deletion, left no option to the Income-tax Officer but to refer a case of penalty u/s 271(1)(c) to the Inspecting Assistant Commissioner if the amount of income, as determined on assessment, in respect of which the particulars had been concealed or inaccurate particulars had been furnished exceeded a sum of twenty-five thousand rupees. The Board are advised that in all cases where the amount of income concealed etc. (as determined on assessment) exceeds twenty-five thousand rupees and the penalty proceedings were commenced before 1-4-1976, the penalty orders would have to be passed by the Inspecting Assistant Commissioners. 4. The effect of deletion of sub-section (2) of section 274 cases where the assessment is made after 1-4-1976 has also been examined. The Board are of the view that as the assessment is made after 1-4-1976, the Income-tax Officer cannot refer the case to the Inspecting Assistant Commissioner for imposition of penalty as the relevant provisions stood deleted from that date. 5. It may be stated the Orissa High Court decision in CIT Orissa Vs. Dhadi Sahu [(1976) 105 ITR 56] has not been accepted, and filing of a petition for leave to appeal to the Supreme Court has been authorised. 6. These clarifications apply mutatis mutandis to levy of penalties u/s 18(1)(i)/17(1)(i) as also u/s 18(1)(iii)/17(1)(iii) of the Wealth-tax Act, 1957/Gift-tax Act, 1958, respectively.