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Commissioner of Income-tax Vs. Hari Chand Hans Raj - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 34 of 1976
Judge
Reported in(1981)21CTR(P& H)129; [1981]128ITR467(P& H)
ActsIncome Tax Act, 1961 - Sections 148, 156, 271(1) and 271(2)
AppellantCommissioner of Income-tax
RespondentHari Chand Hans Raj
Appellant Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Respondent Advocate Vimal Gandhi and; Ram Rang, Advs.
Excerpt:
.....that the penalty under section 271(1)(i) was to be worked out on the difference of the tax on the income assessed originally and that under section 148, treating the firm as unregistered at both the stages as provided under section 271(2) ?' 5. with a view to decide the question of law, the relevant provisions of sections 271(1) and 271(2) of the act maybe reproduced, which are as under :271. (1) if the income-tax officer or the appellate assistant commissioner [or the commissioner (appeals)] 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..........that the penalty under section 271(1)(i) was to be worked out on the difference of the tax on the income assessed originally and that under section 148, treating the firm as unregistered at both the stages as provided under section 271(2) ?'5. with a view to decide the question of law, the relevant provisions of sections 271(1) and 271(2) of the act maybe reproduced, which are as under :'271. (1) if the income-tax officer or the appellate assistant commissioner [or the commissioner (appeals)] 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.....
Judgment:

B.S. Dhillon, J.

1. For the assessment year 1967-68, the original assessment was completed on a total income of Rs. 2,25,990. Later on, the ITO issued a notice under Section 148 of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), and served on the assessee on, March 13, 1972. In terms of the notice, the return of income was to be filed by the assessee on or before March 12, 1972. The assessee applied for extension of time which was allowed up to January 1, 1973, but the return of income was filed on March 12, 1973. The ITO completed the reassessment under Section 148 of the Act on a total income of Rs. 2,74,300. The ITO initiated penalty proceedings under Section 271(1)(a) and issued a show-cause notice to the assessee. A partner of the assessee-firm appeared before the ITO. On the statement of that partner that the penalty should be levied only for the default of one month, the ITO imposed a penalty of Rs. 3,100 under Section 271(1)(a) of the Act, by treating the assessee-firm as unregistered as per provisions of Section 271(2) of the Act.

2. The legality of the imposition of penalty was not challenged before the AAC in appeal by the assessee. The only grievance of the assessee was that the amount of penalty calculated by the ITO was excessive. It was pleaded that the assessee was a registered firm and the penalty was imposed for default in filing the return of income under Section 148 of the Act in the course of reassessment proceedings and the ITO wrongly worked out the tax treating the assessee as unregistered firm on the entire income of the firm and deducted only the tax paid by the registered firm to arrive at the tax payable. The assessee claimed that this was wholly inequitable. The AAC dismissed the appeal.

3. The assessee filed second appeal before the Income-tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as 'the Tribunal'). The Tribunal held that the penalty should have been levied in this case on the tax payable by the assessee as an unregistered firm on its reassessment under Section 148 of the Act and in determining the tax so payable, the tax payable by the assessee as unregistered firm at the time of original assessment should have been deducted and only on the balance tax so payable, penalty' under Section 271(1)(i) equal to 2% of the above tax was to be paid by the assessee.

4. The revenue having felt aggrieved, got the following question of law referred to this court for its opinion:

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the penalty under Section 271(1)(i) was to be worked out on the difference of the tax on the income assessed originally and that under Section 148, treating the firm as unregistered at both the stages as provided under Section 271(2) ?'

5. With a view to decide the question of law, the relevant provisions of Sections 271(1) and 271(2) of the Act maybe reproduced, which are as under :

'271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner [or the Commissioner (Appeals)] 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 cases referred to in Clause (a),--...

(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 reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C ;

(ii) in the cases referred to in Clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income;..... (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.'

6. A bare reading of the above-mentioned provisions would show that in accordance with the provisions of Section 271(1)(a)(i)(b), in addition to the amount of tax, if any, payable by the assessee, a sum equal to two per cent. of the assessed tax for every month during which the default continued, has to be charged as penalty. The words 'assessed tax' have been defined in the Explanation to the section itself, which clearly provides that 'assessed tax' would mean tax as reduced by the sum, if any, deductedat source under Chap. XVII-B or paid in advance under Chap. XVII-C. It may be pointed out that the Tribunal, though reproduced the provisions of Section 271(1)(a)(i)(b) in its order, but failed to reproduce and take notice of the Explanation added to the section. It cannot be disputed that where the provision of law itself is abundantly clear and specially in a taxing statute, any other interpretation is not possible. The scheme of the Act appears to be that even though a registered firm has been granted certain concessions under the provisions of the Act regarding the payment of income-tax, yet the Legislature in its wisdom thought that if such a firm misuses the concession given, so as to default and incurs the imposition of penalty, in that case the concession given shall be withdrawn. This has been precisely provided in Sub-section (2) of Section 271 of the Act. It has been made clear that when the person liable to penalty is a registered firm, notwithstanding anything contained in any other provisions of the 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. In this view of the matter, it is not possible for us to ignore the definition of the words 'assessed tax' as given in the Explanation for the purposes of Section 271 of the Act. The reference made by the Tribunal to the provisions of Section 156 of the Act, in our considered opinion, is not relevant for determining the question in issue. Any notice issued under the said provision to the assessees for the tax payable in pursuance of the reassessment proceedings under Section 148 of the Act, has absolutely no relevance for determining the quantum of penalty. The subject of the quantum of penalty has precisely been dealt with under the provisions of Section 271(1)(a)(i)(b) and the Explanation Added to the said section read with Section 271(2) of the Act. We are, therefore, of the opinion that the Tribunal erred in ignoring the definition of the words 'assessed tax' as given in the Explanation added to Section 271(1)(a)(i)(b) of the Act, and thus fell in error in accepting the appeal of the assessee.

7. For the reasons recorded above, the question of law referred to this court for its opinion is answered in the negative, in favour of the revenue and against the assessee, with costs. We order accordingly.


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