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TMI Blog1981 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... outstanding against the assessee ? " The assessee is a registered firm which runs the Volga Restaurant. In the relevant year it was also running the Janpath Hotel on behalf of the Government. On 13th June, 1961, the assessee was served with notice under s. 22(2) of the Indian I.T. Act, 1922 (to be referred to as " the 1922 Act ") to furnish a return. In accordance with the notice, the return was due on 18th July, 1961. However, the assessee filed a return only on 5th November, 1965. Thereafter, the assessment was completed on 21st March, 1966, under s. 143(3) of the I.T. Act, 1961 (to be referred to as " the 1961 Act "). The total income assessed was Rs. 1,47,013. The ITO thereupon initiated proceedings for the levy of penalty under s. 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the return in time was correct. Secondly, it was urged that the penalty, if at all leviable, should have been imposed in accordance with the provisions of the 1922 Act and not the 1961 Act. The Tribunal relying on the decision of the Supreme Court in Jain brothers v. Union of India [1970] 77 ITR 107, repelled this contention. Thirdly, it was contended that no penalty was imposable, as, on the date of levy of penalty, no tax was payable by the assessee, the tax demanded having been already paid. The Tribunal negatived this argument holding that the interpretation canvassed by the assessee would lead to ridiculous results ; for, as soon as a penalty notice was issued, the assessee would immediately pay all the tax due and then claim that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was neither specific nor clear and did not refer to any matter in controversy before it. As a result the only question that was referred to this court for its opinion was question No. (2) after it had been reformulated. This reframed question has already been set out above, at the beginning. In this court, Mr. G. C. Sharma, learned counsel for the assessee, urged that penalty cannot be imposed at a time when no tax is payable by the assessee, the assessed tax having been already paid before the date of imposition of penalty. He further contended that since s. 271(1)(a) of the 1961 Act had been amended retrospectively, it would not apply to the present case and the provisions of s. 28 of the 1922 Act would apply, as, according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m equal to two per cent. of the assessed tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the assessed tax. Explanation.-In this clause, 'assessed tax' means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C." Elaborating his argument, Mr. Sharma relying on the Supreme Court's decision in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, urged that as " the tax payable " is the amount for which a demand notice is issued under s. 156 of the 1961 Act, this demand having been satisfied there was no tax payable on the relevant date. In determining the tax payable, the tax already paid had to be deducted. He, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under s. 143 minus the amount paid under the provisional assessment order, i. e., the amount demanded as tax payable under s. 156 of the 1961 Act. The Madras High Court dealt with a similar contention as raised before us in CIT v. Kandaswami Weaving Factory & Co. [1977] 110 ITR 84. That court while dealing with the amended s. 271(1)(a)(i), as set out above, repelled the argument that no penalty could be imposed unless the tax was due and outstanding on the date of the imposition of the penalty. Though that case was specifically decided on the language of the amended section, it would appear to us not to make any real difference on this aspect. In the present case, it is not in dispute that a notice of demand under s. 156 of the 1961 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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