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P. Venkata Krishnayya Naidu and Sons Vs. Commissioner of Income-tax, Andhra Pradesh, Hyderabad - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberReferred Case No. 167 of 1978
Judge
Reported in(1985)49CTR(AP)278; [1984]150ITR545(AP)
ActsIncome Tax Act, 1961 - Sections 139(1), 139(2), 142(1), 142(2), 142(2A), 143(2), 148, 185, 271, 271(1) and 271(2)
AppellantP. Venkata Krishnayya Naidu and Sons
RespondentCommissioner of Income-tax, Andhra Pradesh, Hyderabad
Appellant AdvocateS.R. Ashok, Adv.
Respondent AdvocateM. Suryanarayana Murthy, Adv.
Excerpt:
direct taxation - assessed tax - sections 139 (1), 139 (2), 142 (1), 142 (2), 142 (2a), 143 (2), 148, 185, 271, 271 (1) and 271 (2) of income tax act, 1961 - whether assessee (registered firm) can be penalized for delay in filing return under section 271 (1) (a) - assessee paid advance tax which was larger than amount of tax payable on total income determined in hands of it as such on regular assessment - no assessed tax within meaning of explanation to clause (i) of section 271 (1) - no liability to penalty for default falling under section 271 (1) (a) in not filing return of income within time allowed - section 271 (2) not attracted as there was no liability of penalty - held, assessee cannot be penalized. - - on appeal to the aac and the income-tax appellate tribunal, reasonable.....anjaneyulu, j.1. this reference under s. 256(1) of the i.t. act, 1961, raises a question of general importance. the following question is referred by the income-tax appellate tribunal for the opinion of this court : 'whether, on the facts and in the circumstances of the case, a registered firm can be penalised for delay in filing the return under s. 271(1)(a) of the act, when no tax is ultimately found to be due on the date of filing the return ?' 2. the assessee is a firm registered under s. 185 of the i.t. act (hereinafter referred to as 'the act'). it should have filed its return of income by september 30, 1970. the return was filed on september 25, 1972. there was thus a delay of about two years in filing the return. on appeal to the aac and the income-tax appellate tribunal,.....
Judgment:

Anjaneyulu, J.

1. This reference under s. 256(1) of the I.T. Act, 1961, raises a question of general importance. The following question is referred by the Income-tax Appellate Tribunal for the opinion of this court :

'Whether, on the facts and in the circumstances of the case, a registered firm can be penalised for delay in filing the return under s. 271(1)(a) of the Act, when no tax is ultimately found to be due on the date of filing the return ?'

2. The assessee is a firm registered under s. 185 of the I.T. Act (hereinafter referred to as 'the Act'). It should have filed its return of income by September 30, 1970. The return was filed on September 25, 1972. There was thus a delay of about two years in filing the return. On appeal to the AAC and the Income-tax Appellate Tribunal, reasonable cause was accepted for a part of the period of delay, with the result that, eventually the Tribunal held that there was no reasonable cause for failure to furnish the return of income for a period of fourteen months. The ITO was directed to levy penalty with reference to the period of default of fourteen months.

3. It appears, the assessee returned an income of Rs. 50,000. The ITO made an assessment on a total income of Rs. 78,000; but on appeal, the Tribunal eventually accepted the income declared in the return. The advance tax paid by the assessee for the assessment year under consideration, it appears, was more than the tax payable on the total income of Rs. 50,000 declared and finally accepted for purposes of assessment. Consequently, there was no liability, on regular assessment, to pay any further tax. The assessee was, perhaps, entitled to a small refund.

4. On the aforesaid facts, the contention urged was that there was no liability to pay penalty by the assessee under s. 271(1)(a) of the Act, inasmuch as there was no assessed tax at all and, consequently, in terms of the Explanation to s. 271(1)(i) of the Act, no penalty is leviable.

5. In support of the above proposition, the assesses relied on a decision of the Madras High Court in Addl. CIT v. Murugan Timber Depot : [1978]113ITR99(Mad) and the decision of the Gauhati High Court in CIT v. Maskara Tea Estate . Reliance was also placed by the learned counsel for the assessee on another decision of the Gauhati High Court in CIT v. Ganesh Das Sreeram (Firm) . On the other hand, the learned standing counsel for the Income-tax Department relied strongly on the decision of the Gujarat High Court in CIT v. R. Ochhavlal & Co. : [1976]105ITR518(Guj) , supporting the levy of penalty.

6. A scrutiny of s. 271(1) of the Act, to the extent that it is relevant for the present purpose, reveals that, if the ITO, in the course of any proceeding under the Act, is satisfied that any person has, without reasonable cause, either failed to furnish the return of total income under s. 139(1), 139(2) or s. 148 or failed to file such return within the time allowed by the relevant provisions, or that any person, without reasonable cause, failed to comply with a notice under s. 142(1) or s. 143(2) or failed to comply with any direction issued under s. 142(2A) or that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay, by way of penalty, the amounts provided in clauses (i), (ii) and (iii) of sub-s. (1) of s. 271. It would, therefore, follow that, on the ITO deriving satisfaction, as mentioned above, he can exercise power to levy a penalty in respect of any of the defaults of omissions on the part of the assessee above referred to. As stated, the measure of penalty is specified in clauses (i), (ii) and (iii). It is relevant to mention that the measure of penalty is different under each of the three clauses. Cause (i) provides that, in a case where the assessee has either not filed the return or has failed to filed it within the time allowed, the penalty payable by such defaulting person shall be a sum equal to two per cent. of the assessed tax for every month during which the default continued. In a case, where there is failure on the part of the assessee to comply with the notice under s. 142(1), 143(2), etc., the defaulting person is liable to pay penalty in a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income. Finally, in the case of a person concealing the particulars of his income or furnishing inaccurate particulars of income, the measure of penalty as per clause (iii) is a sum equivalent to but not exceeding twice the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. The expression 'the amount of tax sought to be evaded' is explained in Explanation 4 as meaning the difference between the tax on the total income assessed and the tax that would have been chargeable, had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished.

7. The above are the relevant provisions of the Act relating to the levy of penalties under s. 271. The present case falls under s. 271(1)(a) of the Act, as the assessee did not file its return of income within the time allowed under s. 139(1) of the Act and there was no reasonable cause for such failure. It must, therefore, be said that the ITO derived necessary satisfaction to exercise the power for levying penalty in accordance with the measure specified in clause (i) of sub-s (1) of s. 271. A critical study of the nature of the defaults or omissions for which power is conferred on the ITO to levy penalty and the measure of penalty leviable in respect of each of such defaults or omissions, would bring out a clear distinction in each of such defaults or omissions, would bring out a clear distinction in the scheme regarding levy of penalty. In the first category of cases where there is a total failure to file the return of income or there is a failure to file it within the time allowed, the amount of penalty leviable is with reference to the 'assessed tax'. Explanation to clause (i) of s. 271(1) clarifies that 'assessed tax' means tax as reduced by the sum, if any, deducted at source of by the advance tax paid. 'Assessed tax' would thus be the amount of tax determined by the ITO to be payable by an assessee on the total income determined by the ITO to be payable by an assessee on the total income determined by him for purposes of regular assessment as reduced by the tax deducted at source and the advance tax paid. It may be relevant to mention that the above Explanation to clause (i) was introduced by the Direct Taxes (Amendment) Act, 1974, with retrospective effect from the commencement of the 1961 Act, that is to say, with effect from April 1, 1962. Suffice it for the present purpose to point out the Legislature brought out this amendment retrospectively to overcome some difficulty created by the decision of the Supreme Court in CIT v. Vegetable Products Ltd. : [1973]88ITR192(SC) . The Supreme Court held, in the above case, that in calculating the penalty leviable under s. 271(1)(a) (i), the amount paid by an assessee under provisional assessment under s. 23B of the Indian I.T. Act, 1922 had to be deducted from the amount of tax determined on regular assessment. It was, perhaps, not the intention of the Legislature to permit the deduction of provisions tax in calculating the penalty and it was for this reason that an amendment with retrospective effect from the commencement of the 1961 Act was brought about nullifying the effect of the judgment of the Supreme Court to the effect that provisional tax should also be deducted from the tax determined on the regular assessment. The Explanation introduced by the Direct Taxes (Amendment) Act, 1974, now provides that only tax deducted at source and the advance tax paid shall be reduced from the tax determined payable by an assessee on regular assessment and the penalty leviable under s. 271(1)(a) will have to be determined with reference to the balance of tax designated as 'assessed tax'.

8. In respect of an assessee's default for non-compliance with notices issued under s. 142(1) or s. 142(2) or s. 142(2A), the measure of penalty provided is quote different. In respect of these defaults, the penalty leviable shall be a minimum of ten per cent. and a maximum of fifty per cent. of the amount of tax which person had been accepted as the correct of concealment of income. In concealment cases, the minimum penalty leviable shall be equal to the amount of tax sought to be evaded and shall not exceed twice the amount of such tax. As already stated, the expression 'the amount of tax sought to be evaded' is clarified by Explanation 4. It means the difference between the tax on the total income assessed by the ITO and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed.

9. It is clear, therefore, that, in respect of the three distinct categories of cases of penalty, distinct measures of penalty are provided as leviable. Thus, the scheme regarding levy of penalties works differently based on whether it is a case of default in filing the return of income falling under s. 271(1)(a) or a case of default in compliance with the notices issued under s. 142(1) or s. 142(2) or s. 142(2A) falling under clause (b) or a case of concealment falling under clause (c) of sub-section (1) of s. 271.

10. Arguments are advanced on both sides on the question whether a person is liable to penalty under s. 271(1) of the Act, the moment the ITO derives satisfaction referred to in clauses (a), (b) and(c) or whether a person is liable to penalty only when the quantification of the measure of penalty leviable under clauses (i), (ii) and (iii) is possible and not otherwise. These arguments are founded on the basis of principles set out by the Gujarat High Court in CIT v. R. Ochhavlal & Co : [1976]105ITR518(Guj) , on the one hand and Madras and Gauhati High Courts in Addl. CIT v. Murugan Timber Depot : [1978]113ITR99(Mad) and CIT v. Maskara Tea Estate , respectively, on the other. Learned standing counsel for the Income-tax Department, relying on the judgment of the Gujarat High Court above referred to, contends that the liability to penalty arises on the ITO deriving satisfaction that any one of the events specified in clauses (a), (b) and (c) occurred and the measure or quantification of tax according to clauses(i), (ii) and(iii) has relevance only for the purpose of determining the amount of penalty payable. According to the learned standing counsel, it is one thing to say that a person is liable to penalty, because he committed any one of the defaults specified in clauses (a) and (b) or concealed income within the terms of clause (c) and quite a different thing to say that, notwithstanding such acts of mission and commission on the part of the assessee, on penalty could be levied, because, in terms of clause (i), (ii) and (iii), no quantification of penalty is possible. On the other hand, the learned counsel; for the assessee, Shri Ashok, contends that no person shall be liable to penalty based merely on the satisfaction derived by the ITO unless and until is possible for the ITO to direct the levy of penalty as per the measures specified in clauses (i), (ii) and (iii). According to the learned counsel, the provisions contained in clauses (a), (b) and (c) do not declare that a person shall be automatically liable to penalty the moment the ITO derives satisfaction. According to him, after deriving the satisfaction, the ITO, in, exercise of the discretion vested in him to levy penalty, shall have to give a direction that a penalty in accordance with the measure of quantification specified in clauses(i), (ii) and (iii) shall be payable by the assessee and unless and until such direction is given, there is no question of any person being liable to penalty. This view finds support in the judgments of the Madras and Gauhati High Courts above referred to.

11. Before examining the rival contention, it is necessary to refer to the provisions of s. 271(2) of the Act, which, in fact, gave rise to this controversy. Section 271(2), to the extent that it is relevant for our present purpose, provides that, when the person liable to penalty is a registered firm, then notwithstanding anything contained in the other provisions of the Act, the penalty imposable on that firm, if that firm were an unregistered a default falling within the terms of s. 271(1)(a), the provisions of s. 271(2) immediately become applicable. It is urged that the tax payable by the registered firm on the total treating income determined shall have to be determined treating fictionally leviable will have to be determined under s. 271(1)(ii) of the Act. It is further urged that the Explanation to clause (i) will have no application in the case of a registered firm. This contention is resisted by the learned counsel for the assessee stating that s. 271(2) comes into operation only when the person is liable to penalty under s. 271(1). The Explanation to clause (i), the learned counsel contends, makes it obligatory to find out whether there is any 'assessed tax'; in the hands of the registered firm as such. If there is any 'assessed tax', that is to say, where the tax determined as payable on the total income by; the registered firm as such is in excess of the aggregate of the tax deducted at source and the advance tax paid by the registered firm, then the registered firm becomes liable to penalty. In such an event, the pervasions of s. 271(2) of the Act apply and the penalty leviable will have to be determined applying the fiction contained in s. 271(2) of the Act. It is submitted that if, in the hands of the registered firm as such, there is no 'assessed tax' by reason of the tax deducted at source and the advance tax paid by the registered firm being more than the tax determined payable on the total income, then the question of liability to penalty dose not arise and s. 271(2) goes out of operation. As already stated above, in the instant case, the assessee is a registered firm and the tax payable by the registered firm as such on the total income is less then the amount of advance tax paid by the registered firm and, consequently, within the meaning of the Explanation to s. 271(1)(i), there is on 'assessed tax'. Leaning counsel for the assessee, therefore, contends firm as such, the liability to penalty dose not arise. On the other hand, the learned standing counsel contends that the liability to penalty has already arisen because the registers firm committed a default within the terms of s. 271(1)(a) and, consequently, the registered firm is a person liable to penalty within the meaning of s. 271(2). In order, therefore, to determine the amount of penalty leviable, the tax payable by the registered firm as such will have to be ignored and s. 271(2) has to be invoked for purposes of determining the amount of penalty imposable under s. 271(1) of the Act. It may be relevant to mention at this stage that the contention urged by the Revenue finds support in the judgment of the Gujarat High Court and the court in CIT v. Ochhavlal & Co. : [1976]105ITR518(Guj) , relates to the levy of penalty for concealment of income for which penalty is imposable under s. 271(1)(iii). The decision of the Madras High Court in Addl. CIT v. Murugan Tea Estate , relates to the levy of penalty for default in the filing of the income-tax return falling under s. 271(1)(a).

12. We have referred at length above to the scheme of the Act in the matter of levy of penalties. We pointed out that the scheme to impose penalty in respect of the acts of omission and commission falling separately in terms of clauses (a), (b) and (c) of sub-s. (1) of s. 271 is entirely distinct. We have also observed that the concept of 'assessed tax' applicable to the levy of penalty under s. 271(1)(a) is not applicable to the penalties imposable under clauses (ii) and (iii) of s. 271(1). This aspect must be clearly borne in mind. There could, of course, be little doubt that an assessee is bound to file his return of income even though he paid more advance tax than was really required with reference to his income. If he fails to file the return, he will suffer the consequences elsewhere provided in the Act. However, having regard to the scheme of the Act and the distinct provisions governing the levy of penalty for the acts of omission and commission on the part of the assessee falling under clauses (a), (b) and (c), we are inclined to agree with the view of the Madras and Gauhati High Courts that a person is not liable to penalty automatically on the ITO deriving satisfaction as per clauses (a), (b) and (c). It must be remembered that, even though the ITO derives satisfaction regarding the acts of omission and commission on the part of the assessee, still the ITO may refuse to direct the payment of penalty in exercise of the discretion vested in him. If, eventually, the ITO exercise his discretion to direct the payment of penalty, it must be seen whether a penalty can be imposed in terms of the measures specified in clauses (i), (ii) and (iii), the ITO funds that no penalty is imposable, then the ITO cannot give a direction that the assessee shall pay any sum by way of penalty. In fact, on a close scrutiny, we find that the Gujarat High Court does not dispute this proposition in Ochhavlal's case : [1976]105ITR518(Guj) . The following observations of the Gujarat High Court at page 528 of the report are relevant :

'Now, if the quantification of penal liability is based on the amount of tax, if any, payable by an assessee, and if, in a given case, the assessee is not found liable to pay any tax, the quantification of penal liability would be impossible; and in that case, no penalty is leviable.'

13. In our opinion, these observations represent the correct position regarding a person's liability to pay penalty. Having made the above observation's the Gujarat High Court proceeded to observe as under (p. 528) :

'But that dose not mean that penal liability under the first part of subsection (1) was not incurred by that assessee. Impossibility of quantifying penal liability would not obliterate the fact that the assessee had rendered himself liable to a penal action. It is, therefore, a mistake to say that if there is no liability and if, consequent to that, quantification of penal liability is not possible, there was never any penal liability incurred by the assessee.'

14. We find it difficult to subscribe unqualifiedly to the above view. It must, however, he pointed out that the Gujarat High Court was dealing with a case of concealment of income for which penalty is imposable under clause (iii) and not with a case concerning default in the filing of income-tax return for which penalty is imposable under clause (i). The Gujarat High Court had no occasion to examine the impact of the Explanation to s. 271(1)(i) introduced by the Direct Taxes (Amendment) Act, 1974, with retrospective effect from the commencement of the 1961 Act. In our opinion, the operation of the Explanation to clause (i) is not ousted in the case of registered firms as such. It is applicable to all classes of assessee. We cannot accede to the contention of the Revenue that, in so far as registered firms are concerned, the Explanation will have to yield in favour of s. 271(2). It seems to us that the provisions of s. 271(2), for the purpose of determining the penalty imposable on a registered firm, become applicable only after the initial liability to penalty arises by applying the Explanation. If liability to penalty springs up even after applying the Explanation, then the provisions of s. 271(2) are applicable and the penalty imposable shall be quantified giving effect to the provisions contained in s. 271(2).

15. We are not in this case concerned with the provisions relating to the levy of penalty under clauses (ii) and (iii) of s. 271(1) and we would have, therefore, normally refrained from examining the extent of application of these provisions. Keeping, however, in mind what we have earlier set out about the distinct scheme of levying penalties and having also regard to the judgments of the Madras and Gauhati High Courts, we consider it profitable to contrast the provisions contained in clause (ii) and clause (iii) with the provision contained in clause (i). The Madras High Court in Murugan Timber Depot's case : [1978]113ITR99(Mad) dealing with the matter relating to concealment of income, held at page 108 of the report to pay tax an of there was no liability to pay tax, there was no liability to penalty itself. The Gauhati High Court in Maskara Tea Estate's case [1981] 130 ITT 955 held at page 964 of the report that a person, who has had no arrear of taxes and has duly paid up his assessed tax in advance, is exempted by law from paying any penalty and, consequently, such a person is not liable to penalty. These observations are made after taking note of the Madras High Court's view and in a general context. With great respect, we are unable to agree with the aforesaid observations of the Madras and Gauhati High Courts in so far as the levy of penalty under clauses (ii) and (iii) is concerned. It seems to us that the liability of an assessee to pay penalty under clauses (ii) and (iii) has no connection with the amount of tax paid by him. As we pointed out earlier, the scheme is entirely different. The effect of the provisions of clauses (ii) and (iii) may be usefully examined. Let us assume that an assessee committed default of the nature referred to in clause (b) of the sub-s. (1) of s. 271 and has also concealed income by furnishing inaccurate particulars of such income. The following illustration will bring out the real effect of clauses (ii) and (iii) :

Rs.1. Total income declared in the return : say 20,0002. Tax payable on the income declared in thereturn : say 2,5003. Advance tax paid by the assesseem : 10,0004. Total income finally determined for purposesof assessment; 40,0005. Tax chargeable on the total incomedeter-mined for purposes of assessment : 7,0006. Income concealed by the assessee : 20,000

It will be seen from the particulars given that, by mistake or otherwise, the assessee paid advance tax of Rs. 10,000, whereas, on regular assessment, the tax payable on the total income determined is only Rs. 7,000. Could it be said that the assessee is not liable to penalty in the above-mentioned case under clauses (ii) and (iii) of s. 271(1) by reason of the fact that the advance tax of Rs. 10,000 paid by him is far in excess of the tax chargeable on the total income In our opinion, the answer is clearly in the negative. The levy of penalty under clauses (ii) and (iii) is based on an entirely distinct concept. Under clause (ii), the penalty leviable shall not be less than ten per cent. of the amount of tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income. If the income of Rs. 20,000 returned by the assessee had been accepted as the correct income, the tax payable was only Rs. 2,500, whereas the tax on regular assessment is Rs. 7,000. The difference between these two figures is Rs. 4,500 and the minimum penalty imposable under clause (ii) will be ten per cent. of the sum of Rs. 4,500 and the maximum will be fifty per cent. of that amount. It is clear that, not-withstanding the fact that, on regular assessment, the assessee is not required to pay any further tax, he incurred the liability to pay penalty under clause (ii). Let us examine how the same particulars will apply in the case of a penalty for concealment of income of Rs. 40,000. According to clause (iii), the minimum penalty imposable shall be equal to amount of tax sought to be evaded by reason of concealment and the maximum penalty shall be twice the amount of tax sought to be evaded. We have already noticed the expression 'the amount of tax sought to evaded' in Explanation 4. In terms of that Explanation, the difference between the tax of Rs. 7,000 upon which the assessee is chargeable on completion of regular assessment and the tax of Rs. 2,500 payable on the income declared in the return is the 'tax sought to be evaded' by the assessee. Thus, the penalty is imposable with reference to the sum of Rs. 4,500, which is the tax sought to be evaded by the assessee in terms of clause(iii) read with Explanation 4. Consequently, the ITO can levy a minimum penalty of Rs. 4,500 and a maximum penalty of Rs. 9,000 for the concealment of income by the assessee falling in terms of clause (iii). This penalty is imposable notwithstanding again the fact that, on regular assessment, no tax is found to be payable by the assessee; that fact, in our opinion, is irrelevant because the scheme of levy of penalty under clauses (ii) and (iii) is totally different and has nothing to do with the amount of tax, if any, paid by the assessee. The above illustration will apply without any distinction, even if the assessee is a registered firm, which should be treated as an unregistered firm by reason of s. 271(2) of the Act.

16. The above analysis of clauses (i), (ii) and (iii) will also fortify our view that whereas, for purposes of defaults in filing returns falling under clause (a), the Legislature has provided through the Explanation a slightly indulgent method of levy of penalty, there is departure in the provisions contained in clauses (ii) and (iii). We are, therefore, of the opinion that, in so far as the levy of penalty under s. 271(1)(a) is concerned, it must necessarily be correlated with the Explanation and if there is on 'assessed tax', an assessee including a registered firm, does not incur the liability to penalty and, consequently, the provisions of s. 271(2) shall have no application.

17. To sum up, our findings are :

(1) A person is not liable to penalty under s. 271(1) unless the ITO, After deriving the necessary satisfaction, finds that penalty is imposable on such person pursuant to the provisions contained in clauses (i), (ii) and (iii) of s. 271(1).

(2) If quantification of penalty, as provided in clauses (i), (ii) and (iii) is rendered ineffective for any reason whatsoever, then the ITO cannot levy any penalty in respect of the acts of omission and commission on the part of the assessee specified in clauses (a), (b) and (c) of sub s. (1) of s. 271.

(3) The provisions contained in s. 271(2) of the Act come into operation for quantification of the penalty leviable in the case of a registered firm only after the liability to penalty arises strictly in accordance with clauses (i), (ii) and (iii) of s. 271(1) and not otherwise.

(4) While, for the purpose of levy of penalty under s. 271(1), the tax actually paid by way of advance tax, etc., by the assessee assumes significance because of the Explanation to clause (i), the actual payment of tax can have no significance at all for the purpose of levy of penalty under clauses (ii) and (iii), as the scheme of levying penalties under these two clauses is essentially different from clause (i).

Having regard to our above findings, we find that, in the present case, the assessee, which is a registered firm, paid advance tax, which is admittedly larger than the amount of tax payable on the total income determined in the hands of the registered firm as such on regular assessment. Consequently, there is no 'assessed tax' within the meaning of the Explanation to clause (i) of s. 271(1) and it cannot be said that the assessee is liable to penalty for the default falling under s. 271(1)(a) in not filing the return of income within the time allowed. Since there is no liability to penalty, the provisions of s. 271(2) of the Act do not come into operation. The ITO is not, therefore, empowered to levy penalty under s. 271(1)(a) read with s. 271(1)(i) of the Act. The Tribunal erred in holding that the levy of penalty by the ITO is valid.

18. For the aforesaid reasons, we answer the question referred to us in the negative, that is in favour of the assessee and against the Revenue. No costs. Advocate's fee Rs. 500.


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