1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act '), the Income-tax AppellateTribunal, Indore Bench, Indore, has referred the following questions of law for the opinion of this court :
' (1) Whether, on the facts and circumstances of the case, the income-tax authorities were justified in imposing a penalty on the assessee under Section 271(1)(a) of the Income-tax Act, 1961 ?
(2) Whether the penalty proceedings under Section 271(1)(a) are not quasi-criminal and whether the burden of proving the explanation tendered by the assessee to be false or his conduct being contumacious is not on the department ?
(3) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the ratio of the Supreme Court decision in Hindustan Steel Ltd. : 83ITR26(SC) was not applicable to the case of the assessee in view of the provisions and their nature specified in Section 271(1)(a) of the Income-tax Act, 1961 ?
(4) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that establishing a guilty mind does not arise in penalty proceeding under Section 271(1)(a) of the Income-tax Act, 1961, and the question of intention to commit a default in such proceedings is irrelevant ?
(5) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that for the purpose of working out the penalty under Section 271(1) in the case of a registered firm, the attributes of the unregistered firm to be imagined under Section 271(2) logically should be the same as are present in the case of the assessee-firm and directing that the penalty chargeable be worked out accordingly '
2. The facts giving rise to this reference as set out in the statement of the case are as follows : The assessee is a registered firm and follows the financial year as its accounting year. For the assessment year 1967-68, the return of income was due by the 30th September, 1967, but it was filed on October 30, 1968. Thus, the return was delayed by 12 complete months. At the time of the completion of the assessment the ITO initiated penalty proceedings for default under Section 271(1)(a) of the Act. In response to the penalty show-cause notice the assessee stated that the delay in filing the return was caused because the books of the assessee could not be finally closed as they were required to be tallied with the books of various other parties. The ITO did not accept this explanation on the ground that if the reason given by the assessee was correct the assessee could have applied for extension of time and further that apart from the oral arguments no evidence was produced to show that the return was delayed for reasons beyond the control of the assessee. The ITO, therefore, held the assessee to be a defaulter under Section 271(1)(a) of the Act and calculated the penalty at Rs. 3,960 for a default of 12 months, treating the assessee to be an unregistered firm as provided by Section 271(2) of the Act. The assessee preferred an appeal before the AAC before whom the same explanation was repeated by the assessee for the delay in filing the return. The AAC also rejected the explanation of the assessee. He, however, accepted the assessee's submission which was rejected by the ITO that the payment of self-assessment tax of Rs. 1,500 on October 29, 1968, should be considered in computing the penalty. The appeal was, therefore, partly allowed to that extent. The assessee preferred a further appeal before the Income-tax Appellate Tribunal. The Tribunal concurred with the ITO and the AAC that the assessee had failed to make out a reasonable cause for the delay in filing the return and that the penal provisions were properly attracted in the circumstances of the assessee's case.
3. As regards the quantum of penalty the Tribunal held that the penalty imposed even after the relief given by the AAC is disproportionately high. Placing reliance upon the decision of the Supreme Court in the case of Vegetable Products Ltd. : 88ITR192(SC) , the Tribunal held that the tax payable is not the same thing as tax assessed but is the amount for which a demand notice is issued under Section 156 of the Act. The Tribunal took note of the fiction created under Section 271(2) of the Act and held that it will be necessary to determine the tax payable for working out the penalty as if the assessee-firm were an unregistered firm. The AAC followed the method of working out the tax on the assessed income of the assessee-firm as if it were an unregistered firm and therefrom the amount of self-assessment tax of Rs. 1,500 was deducted and the penalty was calculated on the balance of the tax so worked out. The Tribunal held that this method of working out the penalty was not proper. In the present case, the assessee-firm returned an income of Rs. 44,905 with reference to which income paid self-assessment tax amounting to Rs. 1,500. However, the income assessed was Rs. 48,000 and if the assessee was to be assessed as a registered firm the extra amount of tax payable was Rs. 322. If the assessee was to be assessed as if it were an unregistered firm the extra amount of tax would of course be much more. The view taken by the Tribunal is that the attributes of the unregistered firm to be imagined under Section 271(2) of the Act logically should be the same as are present in the case of the assessee-firm, i.e., it should be presumed for the purpose of the fiction that the unregistered firm has to the like extent paid tax on its returned income. From the tax assessed on the unregistered firm the correct deduction will be the notional amount paid in the like manner and to the same extent as is done by the assessee-firm for the purpose of arriving at the amount of tax payable by the unregistered firm stipulated in Section 271(2) of the Act. According to the Tribunal, the tax payable worked out in this manner will provide the correct basis for calculating penalty under Clause (i) of Section 271 of the Act. The Tribunal, therefore, directed the department to work out the penalty chargeable in accordance with the order passed by the Tribunal.
4. Both the assessee and the department submitted applications for stating a case to this court and referring questions of law proposed by them for the opinion of this court. Accordingly questions Nos. 1 to 4 have been referred to this court for opinion by the Tribunal at the instance of the assessee while question No. 5 above has been referred at the instance of the department.
5. We have heard the learned counsel for the assessee and the department. The learned counsel for the assessee submitted that once an explanation has been submitted by the assessee justifying delay in filing the return, the onus is on the department to prove that the delay on the part of the assessee in filing the return was deliberate and intentional because the proceedings for imposition of penalty are quasi-criminal proceedings. We are afraid the contention of the learned counsel cannot be upheld. In the instant case, admittedly, there was a delay of 12 months in filing the return on the part of the assessee. When the assessee was noticed to show cause why penalty should not be imposed on the ground of delay in filing the return, the assessee stated that he had reasonable cause for filing the return beyond time. The cause shown by the assessee was not accepted by the ITO, the AAC and the Income-tax Tribunal. Thus, it has been held by the authorities concerned that the petitioner has without reasonable cause failed to furnish the return within the time allowed. Therefore, the penalty under Section 271(1)(a) of the Act was rightly held imposable on the assessee for the delay in filing the return and no question of law arises. The decisions relied upon by the learned counsel for the assessee are not relevant for determination of the question involved in this case. Those decisions pertain to levy of penalty under Section 271(1)(c) of the Act. In this view of the matter, question No. 1 referred to us has to be answered in the affirmative and against the assessee. We are further of the opinion that, in view of our answer to question No. 1, it is not necessary to answer questions Nos. 2, 3 and 4. In fact, the learned counsel for the assessee conceded that the real question involved was question No. 1 referred to above.
6. As regards question No. 5 referred to at the instance of the department, we are of the opinion that the method adopted by the AAC for working out the penalty in the circumstances of the case was in accordance with law and the view taken by the Tribunal is not tenable. Section 271(2) of the Act is as follows :
' 271. (2) When the person liable to penalty is a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, then, notwithstanding anything contained in the other provisions of this Act, the penalty imposable under Sub-section (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm.'
7. By Section 271(2) of the Act a fiction is created and even if the person liable to penalty is a registered firm, the penalty imposable under Section 271 of the Act shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. Therefore, in the case of a registered firm the tax assessable has to be worked out as if it were an unregistered firm and on that basis the penalty has to be calculated because the fiction created has to be carried to its logical extent. According to the Tribunal, if the penalty is calculated in this manner the result would be preposterous and that as a registered firm the assessee was required to pay only Rs. 322 as tax while the penalty imposable would be Rs. 3,600 in the circumstances of the case. The interpretation of a statute does not depend upon its consequence, if the language of the statute is clear. We are of the opinion that the language of Section 271(2) of the Act is plain and is not capable of any other meaning. In our opinion in cases covered by Section 271(2) of the Act, in order to calculate the penalty, the tax payable by the assessee on the income assessed has to be determined on the basis that the assessee is an unregistered firm and the penalty has to be calculated on the tax so determined. The AAC has followed this method in determining the penalty and the Tribunal was not justified in interfering with the order passed by the AAC.
8. As a result of the discussion aforesaid our answer to question No. 5 is in the negative and against the assessee. In the circumstances of the case, the parties shall bear their own costs of this reference.