- (1.) The Income tax Appellate Tribunal has stated the following question for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in confirming the Appellate Assistant Commissioner's interpretation of the words assessed tax in the case of a registered firm for the purposes of levy of penalty under Section 271(1)(a) of the Income-tax Act, 1961?"
(2.) The assessee is a partnership firm. The assessment year concerned herein is 1973-74. The assessee did not file its return within the time prescribed ; it filed it with a delay of thirteen months. On January 2, 1976, the Income-tax Officer made an assessment order determining its income and tax payable and also continuing the registration since the relevant papers were found to be in order. The assessment order, however, says that penalty proceedings under Section 271(1)(a) of the Act have been initiated separately. A notice was served upon the respondent to show cause why penalty should not be levied upon it under Section 271(1)(a) of the Act. The assessee failed to submit any explanation. Accordingly, the Income-tax Officer levied penalty. The relevant portion reads thus ; "I am thus satisfied that the assessee has without reasonable cause, failed to furnish the return of income with the time allowed under Section 139(1). I, therefore, impose a penalty of Rs. 2,200 for 13 months default at 2 per cent. per month of tax payable for each month of default. Issue notice of demand and challan."
(3.) The assessee appealed to the Appellate Assistant Commissioner, Certain explanation was put forward by the assessee for the delay but it was not accepted. However, the penalty was deleted by the Appellate Assistant Commissioner on the following reasoning : "Learned counsel had another argument, namely, that the calculation of the penalty was incorrect. He pointed out to the provisions of Section 271(1)(a)(i) and the Explanation thereto. He says that '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 In the present case, the tax chargeable was Rs. 1,687 and after deducting tax paid in advance to the tune of Rs. 1,518 the balance tax payable came to Rs. 169 only, therefore, the penalty levied at Rs. 2,200 was excessive. There is sufficient merit in this contention of the appellant and considering the fact that penal interest to the tune of Rs. 1,313 has already been charged, there is no justification for the imposition of penalty at Rs. 2,500 under Section 271(1)(a). The same is, therefore, cancelled.";