- (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.;