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TMI Blog1981 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO levied penalty of Rs. 2,577 against the assessee under s. 27 1 (1)(a) of the Act. The assessee preferred I.T.A. No. 328/70-71, before the AAC, who confirmed the levy of penalty and dismissed the appeal. The assessee preferred second appeal before the Income-tax Appellate Tribunal in I.T.A. No. 1067/71-72. Though at the time of hearing of the appeal an adjournment was asked for by the departmental representative on the ground that a bill incorporating an amendment to s. 271(1)(a)(i) was pending consideration before Parliament, the same was not granted by the Tribunal. Two contentions were raised before the Tribunal on behalf of the assessee. The first contention was that there was reasonable cause for the belated filing of the return. The Tribunal did not accept this contention and found that there was no reasonable cause for the delay in filing the return on the part of the assessee. The next contention was that the entire tax had been paid on November 20, 1968, and consequently no tax was due on October 7,1970; in the circumstances, it was contended on behalf of the assessee that no penalty could be levied. In this context, reliance was placed on the decision of the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal is prevented from rectifying the said mistake under section 254(2) of the Income-tax Act, 1961, by reason of its being an appellate authority ? 3. Whether, on the facts and in the circumstances of the case, levy of penalty for belated filing of the return of income without reasonable cause by the assessee for the assessment year 1967-68, is not valid, because the entire tax assessed had been paid by her before such levy of penalty ? " At the outset it may be mentioned that in the order dated October 26, 1973, it has been found as a fact that there was no reasonable cause for the belated filing of the return. This finding has become conclusive and it is in this background that the questions of law arising for consideration in this reference will have to be answered. Mr. Uttam Reddi, the learned counsel for the assessee, raised the following contentions. (1) Under s. 254(2) of the Act, the Tribunal had no jurisdiction to rectify the order dated October 26, 1973. The power that is conferred on the Tribunal under the said section is only to rectify a mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the returns, she at once became liable for the penalty under s. 271(1)(a)(i) of the Act. The words " in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month " only quantify the amount of penalty. There is no ambiguity at all in the section as amended. What the section contemplates is, according to the learned junior standing counsel, that the assessee shall pay by way of penalty a sum equal to 2 per cent. of the assessed tax and this sum is payable by the assessee in addition to the amount of the tax, if any, payable by him. The words " if any " have been added only as a precautionary measure so that if any tax is due and payable by the assessee on the date of the imposition of the penalty, the assessee may not avoid paying such tax. In the submission of Mrs. Nalini Chidambaram the section cannot be interpreted in such a way that, if no tax is payable on the date of the imposition of penalty, no penalty could at all be levied. There is no substance in the contention of Mr. Uttam Reddi that under s. 254 of the Act, the Tribunal has no jurisdiction to rectify a mistake apparent from the record. Section 254(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is necessary to extract s. 271(1)(a)(i) as it stood prior to its amendment in 1974, and as it stood amended by s. 13 of the Direct Taxes (Amendment) Act, 1974. Section 271(1)(a)(i) of the Act, as it stood prior to its amendment, reads as follows: " 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 be, or ...... he may direct that such person shall pay by way of penalty, (i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the argument of Mr. Uttam Reddi. The result of the introduction of the amended provision with retrospective operation is that the amendment made in 1974 must, by legal fiction, be deemed to have been included in the principal Act as from April 1, 1962. It necessarily follows that at the time when the Tribunal passed the order on October 26, 1973, the section as amended in 1974 must be deemed to have been inserted in the Act. To quote Lord Asquith of Bishopstone in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109 (HL), " if you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of those in this case is emancipation from the 1939 level of rents. The statute says that you must imagine certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs ". In CIT v. S. Teja Singh [ 1959] 35 ITR 408, the Supreme Court observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities from enforcing the rectified order and notice of demand. The High Court issued the writ holding that s. 35 was not applicable to the case as the mistake mentioned in s. 35 bad to be apparent on the face of the order and the question could only be judged in the light of the law as it stood on the day when the order was passed. The Revenue took the matter in appeal to the Supreme Court. The question that was canvassed before the Supreme Court was " Whether, an order, which was proper and valid when it was made, can be said to disclose a mistake apparent from the record if the said order would be erroneous in view of a subsequent amendment made by the Amendment Act when the Amendment Act is intended to operate retrospectively ? ". In dealing with this question the Supreme Court observed as follows : " In deciding this question it would be necessary to determine the true legal effect of the retrospective operation of the Amendment Act. Section 1, sub-section (2), of the Amendment Act expressly provides that subject to the special provisions made in the said Act it shall be deemed to have come into force on the first day of April, 1952. The result of this provision is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d obviously inconsistent with a specific and clear provision of the statute and that must inevitably be treated as a mistake of law apparent from the record. If a mistake of fact apparent from the record of the assessment order can be rectified under s. 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. " The next question to be considered is whether the amended provision has in any manner altered the position as it stood prior to the amendment in 1974 and if so to what extent. We have already extracted above s. 271(1)(a)(i) of the Act as it stood prior to its amendment in 1974. The Supreme Court had occasion to interpret s. 271 (1)(a)(i) of the Act, in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC), as it stood prior to its amendment in 1974. In that case there was a provisional assessment made by the ITO under s. 23B of the Indian I.T. Act on February 2, 1961. Immediately, thereafter, the assessee deposited Rs. 92,294.55. The ITO completed the assessment on 31st October, 1962, and determined the tax due from the assessee for the assessment year at Rs. 1,25,512. He also levied a penalty of Rs. 12,734 for belated filing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... something said earlier. It can only refer to the tax, if any, payable by the assessee mentioned in the first part of section 271(1)(a)(i) of the Act. It is true the expression ' tax' is defined in section 2(43) thus: ' " tax " in relation to the assessment year commencing on the I St day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date.' But the difficulty in this case is, as mentioned earlier, the expression used is not 'tax' but 'the tax'. That expression can be reasonably understood as referring to the expression earlier used in the provision, namely, the amount of the tax, if any, payable' by the assessee. " Based on this interpretation, of the unamended s. 271 (1)(a)(i) of the Act, by the Supreme Court, Mr. Uttam Reddi contended that if no tax is payable by the assessee on the date of the imposition of the penalty, the penal provision of s. 271 (1)(a)(i) of the Act is not attracted and no penalty could be levied. We are unable to appreciate this argument of Mr. Uttam R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of tax, if any, payable by him. Now the question is what the term " the assessed tax " means ? Certainly, there is a distinction between the term " the assessed tax " and " the tax payable ". While the assessed tax is the amount of tax as determined by the ITO under s. 143 of the Act, the tax payable is that amount for which a notice is issued under s. 156 of the Act. Hence, the term " the assessed tax " used in the amended section would mean only the amount of tax as determined by the ITO under s. 143 of the Act. However, this will be subject to the explanation given to the section which is not attracted to the facts of this case. In other words, the tax paid after the assessment of the tax by the ITO under s. 153 of the Act cannot be deducted from " the assessed tax " for computation of the penalty. The penalty is levied for the belated submission of the return without any reasonable cause and it has no relevance to the amount of tax payable by an assessee. Once the assessee has failed to file the return in time without any reasonable cause, the default has occurred and the assessee has incurred the liability to penalty for the said default. In this connection, the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled as early as in 1958 by the decision of the Supreme Court in M.K. Venkatachalam, ITO v. Bombay Dying and Mfg. Co. Ltd. [1958] 34 ITR 143. In view of s. 13 of the Direct Taxes (Amendment) Act, 1974, the amended s. 271(1)(a)(i) of the Act must be deemed to have been in the statute book from its very commencement and that consequently the order passed by the Tribunal on October 26, 1973, was inconsistent with the amended s. 271(1)(a)(i) of the Act. Hence there was an error in the order passed by the Tribunal and that error was glaring and palpable and no extraneous matter was required to show that the order was manifestly wrong and no court would permit such an error to remain on record. The construction to be put on the amended s. 271(1)(a)(i) of the Act also does not involve any lengthy process of argument and decision. There is no ambiguity in the amended section. To us, the amended provision is not capable of more than one interpretation at all. It is clear from the amended section that the penalty does not take the place of the tax, if any, payable, but it is in addition to that amount. Hence, we reject the last of the contentions of Mr. Uttam Reddi also. In view of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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