Income-tax---

----Advance tax---Penalty--Penalty dependent on quantum of assessed tax-- Assessment set aside on the ground of limitation---Penalty cannot be imposed under S.273(b), Indian Income Tax Act, 1961---Indian Income Tax Act, 1961, Ss.215, 217 & 273.

The amount of penalty under section 273(b) of the Indian Income Tax Act, 1961 (as it stood in the assessment year 1969-70), can be imposed only with reference to an amount on which interest is payable under section 217 of the Act and, under the latter section, the said interest i9 "payable by the assessee upon the amount equal to the seventy-five per cent referred to in subsection (1) of section 215 of the Act". Under section 215(1), this amount can be ascertained only on the basis of "tax determined on the basis of regular assessment". Therefore, it is clear that the penalty under section 273(b) of the Act is dependent on the quantum of tax assessed.

Held, that, since in the present case, the very order of assessment had been set aside as barred by limitation, no tax liability, remained against the assessee. The Tribunal had rightly set aside the order of penalty under section 273(b) of the Act.

C.I.T. v. S.P. Viz Construction Co. (No.3) (1989) 176 ITR 47 (Pat.) ref.

K.K. Vidyarthi and S.K. Sharan for the Commissioner.

JUDGMENT

G.C. BHARUKA, J: --In this reference, the Tribunal has sought an opinion of this Court on the following question of law:---.

"Whether, on the facts and in the circumstances of the case, the Tribunal has rightly cancelled the penalty of Rs.2,600 levied on the assessee under section 273(b) of the Income Tax Act, 1961?"

The assessment year involved in 1969-70. The assessee had failed to file the estimate of its income under section 212(3) of the Income Tax Act, 1961 (hereinafter in short, "the Act"), within the prescribed time. Accordingly, a penalty of Rs.2,600 was levied on the assessee under section 273(b) of the Act. This order of penalty has been set aside by the Tribunal on the ground that by order, dated August lop 1976, it had cancelled the very assessment order for the assessment year in question as time-barred and, therefore, no basis was available for computing the quantum of penalty in question.

We have heard Mr. Vidyarthi, learned counsel for the Department. He admits that the assessment order for the year in. question has been set aside by the Tribunals as being time-barred and the same has attained its finality.

The relevant provisions of the Act as they stood at the material time read as follows:---

"Section 273. False estimate of or failure to pay advance tax.---If the Income Tax Officer, in the course of any proceedings m connection with the regular assessment, is satisfied that any assessee-- ......

(b) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of the subsection (3) of section 212,

(i) he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum-- .......

(ii) which, in the case referred to in clause (b), shall not be less than ten per cent but shall not exceed one and a half times the amount on which interest is payable under section 217.

Section 217.--(1) Where, on making the regular assessment, the Income-tax Officer finds that any such person as is referred to in subsection (3) of section 212 has not sent the estimate referred to therein, simple interest at the rate of nine per cent per annum from the first day of April next following the financial year in which the advance tax was payable in accordance with the said provisions up to the date of the regular assessment shall be payable by the assessee upon the amount equal to the seventy-five percent. referred to in subsection (1) of section 215.

Section 215.---(1) Where in any financial year an assessee has paid advance tax under section 212 on the basis of his own estimate, and the advance tax so paid is less than seventy-five per cent of the tax determined on the basis of the regular assessment (reduced by the amount of tax -deductible in accordance with the provisions of sections 192 to 194, sections 194-A and 195) so far as such tax relates to income subject to advance tax and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which the regular assessment is made, simple interest at the rate of nine per cent per annum from the first day of April next following the said financial year up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the said seventy-five percent.'

From the above-referred provisions, it is clear that the amount of penalty under section 273(b) can be imposed only with reference to an amount on which interest is payable under section 217 of the Act and under the latter section the said interest is "payable by the assessee upon the amount equal to seventy-five per cent referred to in subsection (1) of section 215". Under section 215(1), this amount can be ascertained only on the basis of "tax determined on the basis of the regular assessment". Therefore, it is clear that the penalty under section 273(b) of the Act is dependent on the quantum of tax assessed against -the assessee. Since in the present case the very order of assessment has been set aside as barred by limitation, no tax liability remains against the assessee. As such, the penalty is also not calculable. Therefore, in our opinion, the Tribunal has rightly set aside the order of penalty. The same view has been taken by this Court in the case of this assessee for this very assessment year in relation to imposition of penalty under section 271(1)(a) of the Act, which is reported in C.I.T. v. S.P. Viz Construction Co. (No.3) (1989) 176 ITR 47 (Patna).

For the reasons aforesaid, the question referred is answered in the affirmative and in favour of the assessee. There will be no order as to costs.

Let a copy of this judgment be sent to the Income-tax Appellate Tribunal, Patna Bench.

AFTAB ALAM, J---I agree.

M.B-A./45/T.FReference answered.