M.C.AGARWAL, J. - (1.) BY this petition under Art. 226 of the Constitution of India, the petitioner seeks a writ of certiorari to quash an order dt. 10th March, 1988 passed by the ITO, Central Circle, Kanpur levying a penalty of Rs. 4,89,982 under S. 271(1)(a) of the IT Act, 1961 (hereinafter referred to as 'the Act') for asst. yr. 1984-85 and an order dt. 12th March, 1995 passed by the CIT(Central), Kanpur by which he dismissed the revision petition under S. 264 of the Act against the first-mentioned orders.
(2.) I have heard Sri Rajiv Sharma, learned counsel for the petitioner and Sri Rajesh Kumar Agarwal, learned standing counsel for the respondents. The petitioner claims that it is an AOP that carried on business only during the financial year 1983-84 relevant to asst. yr. 1984-85. It filed a return of income on 20th Dec., 1985 after the service of a notice under S. 148. The AO levied the aforesaid amount of penalty for the delay in the filing of the return and the CIT dismissed the revision petition. It is claimed that the petitioner had challenged the assessment order in appeal and ultimately the Tribunal by order dt. 26th May, 1994 allowed the appeal and set aside the assessment remanding the matter back to the AO to make a fresh order of assessment. It is contended that the assessment order having been set aside the penalty cannot stand by itself. When the petition was presented before me on 13th Sept., 1984 the learned standing counsel for the respondents was directed to file counter-affidavit and staying the recovery of the amount of penalty it was ordered that the petitioner may, if so advised apply to the AO for rectification of the impugned order under S. 164 of the Act. In the rejoinder-affidavit filed by the petitioner, copies of the orders passed by the AO as well as by the CIT have been annexed showing that the petitioner's application under S. 154 made to both the authorities have been dismissed. In the counter-affidavit to the writ petition, it has been admitted that the Tribunal has set aside the assessment and proceedings for making a fresh assessment under S. 143(3) are in progress. It is claimed that inspite of the assessment having been set aside the penalty order stands.
(3.) UNDER S. 271(1)(a) of the Act penalty is leviable when there is delay without reasonable cause in filing the return of income required to be filed under S. 139 of the Act. Under S. 271(1)(i)(b) of the Act the penalty leviable is a sum equal to two per cent of the assessed tax for every month during which the default continues. The Explanation defines "assessed tax"to mean tax as reduced by the sum, if any, deducted at source under Chapter XVII-C. Thus, in order that a penalty could be levied under S. 271(1)(a) there has to be an assessed tax, meaning thereby that there should be an assessment under which the assessed tax has been determined. There was an assessed tax of Rs. 15,81,137 when the AO levied the penalty and it is on that amount of assessed tax that the AO had calculated the penalty at the rate of two per cent per month for a period of 16 months. It was in this manner that the AO had arrived at the amount of penalty of Rs. 4,89,952. The assessment order having been set aside by the Tribunal the assessed tax vanishes and there can be no assessed tax unless an assessment is again made in pursuance of the order of the Tribunal. There being no assessed tax, the amount of penalty cannot be determined and, therefore, the penalty levied by the impugned order dt. 10th March, 1988 cannot survive. The aforesaid provisions clearly indicate that a penalty under S. 271(1)(a) of the Act cannot be levied before an assessment has been made and the assessed tax has been determined. The assessment has to be made again the pursuance of the order of the Tribunal and, therefore, if there is any assessed tax in pursuance of that order, an order under S. 271(1)(a) of the Act can be passed thereafter in accordance with law.;