1. In Tax Case No. 389 of 1974, the Income-tax Appellate Tribunal, Madras Bench, under Section 256(1) of the Income-tax Act, 1961, has referred the following question for the opinion of this court:
'Whether, where an assessee which is a registered firm has paid the entire tax payable before the date of imposition of penalty, no penalty could be levied for the belated filing of the return despite the provisions of Section 271(2)?'
2. The Commissioner of Income-tax, Madras (Central), Madras, at whose instance the above question was referred, filed T.C.P. No. 56 of 1975 on the file of this court and by an order dated October 27, 1975, this court directed the Tribunal to refer the following question also:
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that no penalty under Section 271(1)(a) was leviable on the assessee as no tax was due from it on the date of imposition of penalty ?'
3. This question is covered by Tax Case No. 191 of 1977.
4. The facts lie within a very short compass. The matter relates to the assessment year 1964-65. The accounting year of the assessee ended on March 31, 1964. The return of income was due to be filed on or before September 30, 1964, under Section 139(1) of the Income-tax Act, 1961. A notice under Section 139(2) of the Act calling upon the assessee to file its return of income for the assessment year in question within 30 days from the date of receipt thereof was served on the assessee on August 31, 1964. Evelinas per this notice the assessee should have filed the return on or before September 30, 1964. The assessee filed an application in Form No. 6 on September 30, 1964, praying for extension of time for filing the return till 30th December, 1964. This was received by the Income-tax Officer on October 5, 1964, and there is nothing to show that he passed any order on that application and communicated the same to the assessee. The assessee actually filed the return on May 20, 1965, disclosing an income of Rs. 2,16,999. The assessment was completed on August 17, 1968.
5. Thereafter, the Income-tax Officer initiated proceedings for levy of penalty for belated filing of the return under Section 271(1)(a) and a notice under Section 274 was issued to the assessee calling upon him to show cause why penalty should not be levied. Subsequently, by an order dated July 29, 1970, the Income-tax Officer levied a penalty of Rs. 12,480 computing the delay as four completed months, viz., from January to April, 1965. Against this order, the assessee preferred an appeal to the Appellate Assistant Commissioner of Income-tax, which appeal proved unsuccessful. Thereafter, the assessee preferred an appeal to the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal, purporting to follow the judgment of the Supreme Court in Commissioner of Income-tax v. Vegetable Products Ltd. : 88ITR192(SC) , held that no penalty was leviable in the present case, since as on the date of the order of penalty, viz., July 29, 1970, no tax was payable by the assessee. It is the correctness of this conclusion that is challenged in the form of the question covered by Tax Case No. 191 of 1977. The question covered by Tax Case No. 389 of 1974, as we have pointed out already, has become academic for the reasons to be indicated later in the course of this judgment. Even if the Tribunal is correct in its understanding that the Supreme Court in the judgment referred to above has held that if no tax was payable or due as on the date of the order of the Income-tax Officer levying penalty, no penalty was leviable, such a conclusion could have been arrived at only on the basis of the language of the relevant provisions contained in Section 271(1) of the Income-tax Act, 1961. That provision, dealing with the penalty payable for failure to file the return within the time prescribed, stated that the Income-tax Officer 'may direct that such person shall pay by way of penalty,--......in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax'. However, subsequent to the decision of the Supreme Court, Parliament has amended the relevant provisions of the statute by the Direct Taxes (Amendment) Act, 1974, with retrospective effect, viz., from April 1, 1962, i.e., the date on which the Income-tax Act, 1961, came into force. The relevant amended provision as is now in the statute states:
'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, but not exceeding in the aggregate fifty per cent. of the assessed tax.
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'.
6. Thus, as a result of the amendment, it is made clear that the penalty has to be calculated on the basis of the tax assessed irrespective of the fact whether the tax was due and outstanding on the date when the order imposing penalty was made or not. In view of this amendment with retrospective effect, the question referred to this court in Tax Case No. 191 of 1977 has to be answered in the negative and against the assessee, and it is answered accordingly.
7. However, the learned counsel for the assessee contended that, even after the amendment, the position remained the same as far as the present assessee is concerned, because the present assessee is a registered firm and the penalty has to be calculated as provided for in Section 271(2) of the Act, and if Section 271(2) of the Act is applied, then no penalty will be imposable on the assessee. According to the learned counsel for the assessee, before penalty can be levied under Section 271(1)(a) read with Section 271(2) of the Act, there must be an assessed tax in respect of the assessee, and in the case of an assessee as in the present case, viz., a registered firm, there is no assessed tax, and, therefore, no penalty is imposable. We are of the opinion that this argument is misconceived. Section 271(2) reads as follows:
'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.'
8. Thus, it will be seen that Section 271(2) deals with the quantum of penalty imposable in the case of a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, and for that purpose creates a fiction. Consequently, the effect of Sub-section (2) of Section 271 is to treat a firm like the assessee, viz., a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, as an unregistered firm and compute the income of the unregistered firm and assess the tax payable by the said unregistered firm on the income so computed, and calculate two per cent. of the tax so assessed for each month as the penalty. The use of the words 'the same amount' occurring in Section 271(2) makes it clear that the section was concerned only with the quantification of the amount of penalty, and it has nothing to do with the liability to pay as such. In view of this we are of the opinion that the contention of the learned counsel for the assessee that, notwithstanding the amendment to Section 271(1), no penalty can be imposed on the assessee is without substance.
9. Since the Tribunal has held that no penalty as such was imposable on the assessee herein, it did not go into the quantum of the penalty. Thequestion covered by Tax Case No. 389 of 1974 is essentially concerned with the quantum of penalty. In view of our conclusion that as a result of the subsequent retrospective amendment of the Act, the penalty is imposable on the assessee, the Tribunal will have now to determine the quantum of penalty to be levied on the assessee under Section 271(1) read with Section 271(2) of the Act. In view of this, we are returning the question covered by Tax Case No. 389 of 1974 unanswered.
10. There will be no order as to costs in any of these references.