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Commissioner of Income-tax, Bombay City-i Vs. Smt. Kamlaben N. Patel - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 58 of 1973
Judge
Reported in(1983)32CTR(Bom)315; [1982]138ITR579(Bom); [1983]12TAXMAN89(Bom)
ActsIncome Tax Act, 1961 - Sections 11, 12, 139, 139(1), 139(2), 140A, 148, 271, 271(1), and 274
AppellantCommissioner of Income-tax, Bombay City-i
RespondentSmt. Kamlaben N. Patel
Excerpt:
.....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. in view of this, we totally fail to see how we can answer the question referred to us disregarding the explanation. khatri, the learned counsel for the assessee, has, however, placed strong reliance on the decision of a division bench of the allahabad high court in rampur distillery & chemical works ltd......act, 1961 (hereinafter referred to as 'the said act'), at the instance of the commissioner. the question referred to us for our determination in this reference is as follows :'whether, on the facts and in the circumstances of the case, the penalty leviable under section 271(1)(a)(i) of the income-tax act, 1961, against the assessee was to be quantified with reference to the gross tax as also reduced by self-assessment tax, if any, under section 140a of the act, it being conceded by the revenue at the time of the hearing of the appeals that the gross tax was to be reduced by the advance tax and the tax deducted at source ?'2. in view of the very limited controversy before us, we propose to summarise the relevant facts in so far as they pertained to that controversy. the assessment.....
Judgment:

Kania, J.

1. This is a reference on a case stated under s. 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the said Act'), at the instance of the Commissioner. The question referred to us for our determination in this reference is as follows :

'Whether, on the facts and in the circumstances of the case, the penalty leviable under section 271(1)(a)(i) of the Income-tax Act, 1961, against the assessee was to be quantified with reference to the gross tax as also reduced by self-assessment tax, if any, under section 140A of the Act, it being conceded by the Revenue at the time of the hearing of the appeals that the gross tax was to be reduced by the advance tax and the tax deducted at source ?'

2. In view of the very limited controversy before us, we propose to summarise the relevant facts in so far as they pertained to that controversy. The assessment years are 1962-63 and 1963-64. The assessee failed to furnish returns of her income in accordance with the provisions of s. 139(1) of the said Act for the said two years. Notices under s. 139(2) of the said Act were served by the ITO on the assessee to file her returns. Some extension of time was applied for and granted. It is common ground, however, that in respect of the assessment year 1962-63, there was a delay of 11 months. The assessments were finalised by the ITO on October 31, 1966, and on that very day, the penalty notices were issued to the assessee under s. 271(1)(a) read with s. 274 of the said Act. The assessee gave certain explanations for the delay in the filing of the returns, which were rejected by the ITO and the higher authorities. We do not propose to deal with those explanations, because there is no question in that connections before us. After rejecting the explanations, the ITO levied a penalty of Rs. 20,605 in respect of the assessment year 1962-63 and Rs. 15,480 in respect of the assessment year 1963-61 against the assess. An appeal preferred by the assessee to the AAC was dismissed. The assessee then came by way of an appeal before the Tribunal. The Tribunal rejected the contentions of the assessee with regard to the explanations given by the assessee for the delay. However, by way of an additional ground, which the assessee was permitted to raise, it was contended by the assessee that the penalty levied exceeded what was the maximum permissible penalty leviable under s. 271(1)(a) of the said Act. The brief controversy was that, according to the assessee, the maximum penalty leviable was to be calculated at 2 per cent. of the net tax payable by the assessee in respect of the assessment year concerned, after taking into account or giving credit for the tax deducted at source, the advance tax paid as well as tax paid at self-assessment under s. 140A of the said Act. Whereas, according to the Revenue, although the tax deducted at source and advanced tax had to be given credit for in computing the net tax payable, the assessee was not entitled to any credit in respect of the tax paid on self-assessment under s. 140A. The Tribunal accepted the contention of the assessee and reduced the amount of penalty and directed the ITO to determine the amount of penalty after calculating the amount and net tax payable by the assessee as per the contentions of the assessee set out above.

3. It is from this decision of the Tribunal that the aforesaid question has been referred to us. Section 271 of the said Act deals with the penalty for failure to furnish the returns, comply with notices, concealment of income and so on. The relevant portion of the said section reads thus :

'271. (1) If the Income-tax Office 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 case of a person referred to in sub-section (4A) of section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent. of the total income computed under this Act without giving effect to the provisions of sections 11 and 12, for each year or part thereof during which the default continued;

(b) in any other case, 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 during which the default continued.

Explanation. - In this clause 'assessed tax' means tax as reduce by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C......'

4. It may be mentioned that the aforesaid Explanation has been inserted by the D. T. (Amendment) Act, 1974, with retrospective effect in the said section.

5. There is no doubt, and there can be none, that if the Explanation set out earlier is to be given effect to, the contention urged by the assessee before the Tribunal, and which the assessee's counsel, Mr. Khatri, has also pressed before us, must be rejected, as the Explanation makes it clear that in computing the assessed tax, the deduction is to be allowed in respect of the tax deducted at source or tax paid in advance, so that no deduction would be available in respect of the tax paid on self-assessment under s. 140A of the said Act. The only contention advanced by Mr. Khatri, the learned counsel for the assessee before us, is that as the said Explanation has been inserted after the decision of the Tribunal, in this case, which was given in 1971, we should answer the question referred to us without taking that Explanation into account. It appears to us that this submission of Mr. Khatri must be rejected at once. As pointed out above, the amendment introducing the Explanation into the said s. 271 is expressly made with retrospective effect right from the day when the said Act came into force. In view of this, we totally fail to see how we can answer the question referred to us disregarding the Explanation. Although, really speaking, no decision is required to support the view which we have taken, we may refer to the decision of the Punjab and Haryana High Court in CIT v. Mangat Ram Kuthiala [1978] 111 ITR 823, where the very same Explanation was under consideration. It was held that as a result of the amendment of s. 271(1)(a)(i), the expression now used is 'assessed tax' and not 'tax payable', and this amendment has been made retrospective and has to be deemed always to have been in force. Therefore, the Tribunal was not right in holding that penalty was not imposable. We may mention that this decision was rendered by the Punjab and Haryana High Court after taking into account the decision of the Supreme Court in CTO v. Sri Venkateswara Oil Mills [1973] 32 STC 660.

6. Mr. Khatri, the learned counsel for the assessee, has, however, placed strong reliance on the decision of a Division Bench of the Allahabad High Court in Rampur Distillery & Chemical Works Ltd. v. CIT : [1965]55ITR338(All) . In that case, the question related to the calculation of depreciation. While the reference was pending in the High Court, the Removal of Difficulties Order, 1949, was amended by the Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order, 1962. Section 2 of the Order inserted an Explanation, after the proviso to para. 2, that 'depreciation actually allowed' shall, in cases where income had been exempted from tax under any agreement with a Ruler, be the depreciation that would have been allowed had the income not been so exempted. It was held by the Division Bench of the Allahabad High Court that the question referred should be answered without regard to the Explanation added in the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, by the Amendment Order of 1962, as the Amendment Order did not exist when the reference was made. We do not propose to discuss this case in detail. In the first place, it appears to us to turn on its own facts. In that case, the retrospective amendment was made not by a statute passed by Parliament, as in the case before us, but by a Presidential Order and apart from this, if the said decision of the Allahabad High Court is construed as having taken the view that even if the amendment is retrospective and applicable to the relevant period for which the assessment has been made, if the amendment is made after the Tribunal had decided the matter, it should be ignored in answering the question referred, in that event, we respectfully dissent from that view and we accept the view of the Punjab and Haryana High Court in the case to which we have referred earlier.

7. In the result, the question referred to us is answered in the negative and against the assessee. The assessee must pay the costs of the reference.


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