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TMI Blog1976 (1) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income for the purpose of computing the penalty under section 271(1)(a) of the Act?" The facts leading to this reference are as follows. We are concerned with assessment year 1965-66. The assessee is a registered firm and its previous year for the purpose of assessment year 1965-66 was calendar year 1964. Under section 139(1) the return of income was due on June 30, 1965. However, a notice under section 139(2) was served by the Income-tax Officer on the assessee-firm and the notice was received on May 4. 1965, requiring the firm to submit its return of income by June 2, 1965. No return of income was filed on or before June 3, 1965, nor was an application for extension of time submitted during this period. An application for ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-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......... 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied on a registered firm and this is by virtue of the so-called fiction under section 271(2). Mr. Kaji in this connection contends that there are three distinct stages in connection with the computation of the amount of penalty. Stage number (1) is the assessment of the total income ; stage No. (2) is the assessment of tax on that total income ; and stage No. (3) is the computation of penalty in the light of the tax assessed after going through stage No. (2). He contends that sub-section (2) of section 271 deals with the question of penalty on the footing of the penalty payable by registered firm being the same as would be imposable on that firm if the firm was an unregistered firm. What it means, according to Mr. Kaji, is that the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self shall be taken to be an amount equal to the tax which would have been payable by an unregistered firm on an income equal to the firm's total income......" The rest of the provisions of clause (d) of the proviso to section 28(1) of the Act of 1922 are not material for the purposes of this judgment. It is,therefore, clear, and to that extent Mr. Kaji's submission is right, that under clause (d) of the proviso to section 28(1), under the Act of 1922, when it came to the computation of penalty for non-filing or late filing of the return and thus incurring the penalty under clause (a) of section 28(1), for the purposes of computing the penalty the income-tax and super-tax payable by the firm was to be considered to be an amount equal to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Otherwise, there was no necessity to effect a change in the language of the proviso to clause (d) of section 28(1) of the Act of 1922. What we have now to ask ourselves is : what would be the penalty imposable on this firm if it were an unregistered firm and since under clause (i) of section 271(1) the amount of penalty is a certain percentage of the tax payable by the unregistered firm, the question would arise as to what would be the tax payable by the unregistered firm. Under the Income-tax Act, 1961, the tax has to be computed on the total income as assessed in the case of any particular assessee. Therefore, even for the purposes of computing the penalty the question of what would have been the total income of the firm if it were an u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of tax, the amount of tax payable by the firm if it were an unregistered firm would certainly arise and, in ascertaining that figure, the question of what is the total income of the firm, if unregistered, has also to be taken into account, and, in assessing that total income, under section 280-O, the amount of annuity deposit has to be deducted. Such deduction must be allowed in computing the amount of penalty payable by the firm if unregistered. Under these circumstances the conclusion reached by the Tribunal was correct. The passage from the decision of the House of Lords cited by the Supreme Court in Commissioner of Income-tax v. S. Teja Singh would apply with full force in this case. The passage is to this effect : "If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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