COMMISSIONER OF INCOME TAX Vs. GANESH DAS SREERAM FIRM

JUDGEMENT

(1.) THE assessee was a registered firm at the relevant time. It, however, defaulted in submitting its returns for the assessment, years 1966 -67 and 1969 -70. The delay was not considered to be due to any reasonable cause. The ITO, therefore, imposed a penalty of Rs. 64,730 for the year 1966 -67 in pursuance of the provision in Section 271(1)(a) read with Section 271(2) of the I.T. Act, 1961, hereinafter "the Act". As for the other assessment year the penalty of Rs. 27,360 was imposed. Calculation in both the cases was at the rate of 2% per month for the period of default. On appeal being preferred before the AAC, the penalty orders were set aside. On further appeal by the Department, the Tribunal up held the order of the AAC. On a prayer for reference to this court the following question has been referred :

(2.) IT may be stated that the assessed tax on the firm, treating it as a registered firm, came to Rs. 23,680 for the assessment year 1966 -67, whereas it had paid the sum of Rs. 27,616 as advance tax. In so far as the assessment year 1969 -70 is concerned, the assessed tax, as a registered firm, came to Rs. 36,846 against the advance deposit of Rs. 43,020. It was because of this that the AAC and the Tribunal held that, in view of the provision in Section 271(1)(i)(b) read with the Explanation, there was nothing to act upon in so far as the penalty was concerned because the "assessed tax" came to a negative figure for both the years. The contention of the Revenue before the learned Tribunal was that once a default is committed by a registered firm in furnishing returns in time without reasonable cause, it has to undergo penalty as provided in Sub -section (2) of Section 271. This contention has been rejected.

(3.) WE may point out that before the amendment of Section 271 in 1974, Clause (i) was differently worded as it had stated that in the cases referred to in Clause (a), in addition to the amount of the tax, if any, payable, the penalty would be equal to 2% of the tax for every month of default. As against this the amendment of 1974 which was given retrospective effect from the date of the commencement of the Act stated that the amount of penalty shall be "a sum equal to two per cent. of the assessed tax " for every month of default. An Explanation was also inserted which stated that the expression "assessed tax" in the clause means " tax as reduced by the sum if any......paid in advance under Chapter XVII -C ". The expression "assessed tax", as it found place in the section by virtue of the 1974 amendment, has to be understood as the amount to which a person was actually taxed (minus advance payment, etc.), and not the notional tax to which the person, if it be a registered firm, were to be assessed by treating it as unregistered firm.