COMMISSIONER OF INCOME-TAX VS SUGAN CHAND & SONS
1991 P T D 128
[Rajasthan High Court (India)]
Before J.S. Verma C.J. and N.C. Kochhar, J
COMMISSIONER OF INCOME-TAX
versus
SUGAN CHAND & SONS
D.B. Income-tax Reference No. 48 of 1983, decided on 11/08/1988.
Income-tax---
----Penalty---Registered firm---Delay in filing return for assessment year 1974-75---Quantum of penalty---Penalty cannot exceed 50% of assessed tax-- Indian Income-tax Act, 1961, S.271(l) (a).
For the assessment year 1974-75, the assessee filed a return on December 15, 1975, and the Income-tax Officer imposed penalty to Rs.2,580 under section 271(1)(a) of the Indian Income-tax Act, 1961, for late filing of the return. On appeal, the Appellate Assistant Commissioner held that the maximum penalty could not exceed 50% of the assessed tax and so reduced the quantum of penalty to Rs.700 and this was upheld by the Tribunal. On a reference:
Held, that the Tribunal was right in holding that prior to April 1, 1976, the maximum penalty under section 271(1)(a) calculated at the rate of 2% of the assessed tax for every month during which the default continued, could not exceed 50% of the assessed tax.
B.R. Arora for the Commissioner.
Nemo for the Assessee.
JUDGMENT
J.S. VERMA, C.J: -This is a reference under section 256(1) of the Income-tax Act, 1961 (for short "the Act"), at the instance of the Revenue, to answer the following question of law, viz.:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty imposable under section 271(1)(a) of the Income-tax Act, 1961, in the case of the assessee registered firm cannot exceed 50% of the assessed tax worked out in the status of a registered firm?"
The relevant assessment year is 1974-75. The return of income was required to be filed by the assessee on or before July 31, 1974, but it was actually filed late on December 15, 1975. The Income-tax Officer, therefore, initiated penalty proceedings under section 271(1)(a) of the Act. The Income-tax Officer levied penalty of Rs.2,580. The assessee preferred an appeal to the Appellate Assistant Commissioner who held that the maximum penalty could not exceed 50% of the assessed tax and since the amount of assessed tax was only Rs.1,407, it was held that the penalty could not exceed Rs.700. The amount of penalty was, therefore, reduced accordingly. On further appeal, the Income-tax Appellate Tribunal has affirmed the view of the Appellate Assistant Commissioner. Hence, this reference at the instance of the Revenue.
There is no controversy that prior to April 1, 1976, the maximum penalty calculated at the rate of 2% of the assessed tax for every month during which the default continued, could not exceed 50%m of the assessed tax. This was the upper limit for penalty prescribed at the time when the assessee committed default incurring the liability for payment of penalty. Obviously for this reason, any amount in excess of the prescribed upper limit could not be imposed as penalty. The Tribunal's view to the same effect has, therefore, to be upheld.
Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the Tribunal's view was justified. No costs.
Z.S./726/TReference answered against the Revenue.