Per Shri H. S. Ahluwalia, Judicial Member - Return in this case was due on 30-6-1974. It was not filed by the assessee and, accordingly, a notice under section 148 of the Income-tax Act, 1961 (the Act) was issued to him, in response to which he filed a return on 6-10-1977. The ITO, therefore, initiated penalty proceedings under section 271(1) (a), of the Act, in response to which the assessees contention was that the delay should be calculated after the service of the notice under section 148. The ITO, however, noticed that the assessee had an income of Rs. 32,000 which was much above the minimum taxable limit. He had not indicated any reasons for his failure to comply with the provisions of section 139(1) of the Act. Therefore, his contention that the delay should be calculated after service of notice under section 148 could not be accepted. Holding the delay to be of 39 months, he levied a penalty of Rs. 1,594 subject to the fact, that the penalty was restricted to 50 per cent of the assessed tax, which came to Rs. 1,021, the AAC has dismissed the assessees appeal. The assessee has consequently come up in second appeal before us.
2. We have heard the representatives of the parties at length in this appeal. On behalf of the assessee, it has been contended that there was no conscious default on its part. The assessed tax with reference to which penalty under section 271(1) (a) had to be worked out was nil and, hence, no penalty could be levided in the present case. In support of this contention it has been argued that the assessment tax on the assessee-firm was only Rs. 5,787, which as a result of our appellate order of date, would further stand reduced. According to the ITO himself, the assessee had paid advance tax and tax at source had been deducted to the tune of Rs. 8,307. Since no tax was payable by the assessee under section 140A of the Act, therefore, no penalty could have been levied upon it for the delay in filing of its return. In fact, the tax has been calculated by the ITO by treating the assessee to be a non-registered firm. In this behalf, our attention was drawn by the representative of the assessee to a judgment of the Gauhati High Court in CIT v. Maskara Tea Estate  130 ITR 955. In this case, the assessee-firm had failed to file its return by the due date, i.e., 30-9-1963, and the return was filed by it as late as on 28-5-1966, declaring an income of Rs. 47,455, which was ultimately assessed at Rs. 50,697. The ITO initiated penalty proceedings and levied penalty at Rs. 9,777, being 50 per cent of the assessed tax. at Rs. 19,555. On appeal, the assessee contended that its status has been wrongly determined as an unregistered firm and the Tribunal had already directed grant of registration, in which status the tax payable was only Rs. 1,670, whereas it had paid advance tax of Rs. 1,855. Therefore, it was not liable to pay any tax and, consequently, no penalty could be levied. It was held affirming the decision of the Tribunal that section 271(2) was not attracted to the case of the assessee-firm and the levy of penalty on the assessee was not valid. The same view has been taken by the Amritsar Bench of the Tribunal in ITO v. Sethi Industries  11 TTJ 208. It is also borne out by the wordings used in clause (b) of sub-section (1) of section 271, in which it has been mentioned that the penalty shall be in addition to the amount of tax, if any, payable by him, be calculated at 2 per cent of the assessed tax (sic) and this assessed tax means the tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C. In the present case, the assessee actually got a refund. So, there was no question of any tax payable and no penalty could be levied.
Accordingly, we accept the appeal and delete the penalty.