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TMI Blog1993 (10) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... has referred the following question for adjudication by this court : "Whether, on the facts and in the circumstances of the case and in view of the provisions of section 271(2), penalty is to be calculated treating the firm as an unregistered firm when the assessee-firm committed default in submission of returns and rendered itself liable for penalty under section 271(1)(a)?" In our view the question referred needs a slight modification, and accordingly we reframe the same for adjudication. The reframed question reads as follows: "Whether penalty can be levied under section 271(1)(a) of the Income-tax Act, 1961, on a registered firm by treating it as an unregistered firm in terms of section 271(2) of the Act when no tax is payable by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the provisions of section 271(2) would be rendered nugatory if the plea is accepted. The Tribunal noticed that the decision in Ganesh Dass case [1988] 169 ITR 221 (SC) related to levy of interest under section 139(8) of the Act, but its ratio was relevant. Reliance was also placed on a decision of the Rajasthan High Court in CIT v. Builders Engineers Co. [1989] 175 ITR 317. It was held that where advance tax paid covers the entire amount of assessed tax, penalty under section 271(1)(a) is not leviable. Accordingly, the orders imposing penalty were set aside, and the matter was remitted back to the file of the Income-tax Officer to make fresh adjudication in the light of the observations made. This direction was given keeping in view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances as may be prescribed, reduce or waive the interest payable by any person under any provision of this section." "271. Failure to furnish returns, comply with notices, concealment of income, etc.-(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person (a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section. " The apex court in relation to levy of interest under section 139(8) in Ganesh Dass case [1988] 169 ITR 221, observed as follows (at page 230) : "Before we part with these appeals, we think we should clarify one situation, namely, where the advance tax duly paid covers the entire amount of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reating it as an unregistered firm. While deciding the liability for penalty under sub-section (1) effect has to be given to sub-section (2) which comes into operation only to make the formula for calculating the penalty under sub-section (1) workable. When the assessed tax is nil, it would be impracticable to impose penalty under sub-section (2) of section 271. Similar view expressed by the Rajasthan High Court in the case of Builders Engineers' case [1989] 175 ITR 317 and by the Punjab and Haryana High Court in the case of CIT v. Harish Chand and Co. [1989] 179 ITR 419 has our concurrence.
Our answer to the question referred is in the negative, in favour of the assessee and against the Revenue. No costs.
D. M. PATNAIK J.-I agree. X X X X Extracts X X X X X X X X Extracts X X X X
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