Income-tax---

----Penalty---Appeal to Appellate Tribunal---Delay in filing returns-- Quantum of penalty---Power of Tribunal---Tribunal has no power to reduce penalty to a figure lower than minimum prescribed by statute---Indian Income Tax Act, 1961, S. 271(1)(a).

Under the provisions of section 271(1)(a) of the Income Tax Act, 1961, if the Income-tax Officer, if satisfied that an assessee has without reasonable cause, failed to furnish the return within the time prescribed under section 139(2) of the Act, he may direct that such person shall pay by way of penalty, inter alia, in addition to the amount of the tax., if any, payable by him, a sum equal to two per cent of the assessed tax for every month during which the default continued. The use of the expression "equal to two percent." clearly gives an indication that it should not be anything less or more than what is prescribed. The section mandates that once the authority has come to the conclusion that penalty is leviable, the authority exercising his powers under the Act, is bound to impose the penalty that is prescribed by the statute. The Appellate Tribunal is an authority functioning under the provisions of the Income-tax Act, and after the Tribunal has recorded a finding that penalty is attracted, it has no jurisdiction to reduce the amount of penalty below that prescribed under that section,

Maya Rani Punj v. CIT (1986) 157 ITR 330 (SC) fol.

S.V. Subramaniam for the Commissioner.

Nemo for the Assessee.

JUDGMENT

N. M. B. BALASUBRAMANIAN, J.---At the instance of the Revenue, the Appellate Tribunal has referred the following questions under section 256(1) of the Income Tax Act, 1961, for our opinion:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that penalty under section 271(1)(a) leviable in this case, should be restricted to Rs.1, 000 against Rs.6, 908 leviable ac per the provisions of section 271(1)(a)?

(2)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was within its powers in reducing the penalty levied under section 271(1)(a) to a figure lesser than the minimum leviable under section 271(1)(a)?"

The short question that arises is whether the Tribunal was competent to reduce the amount of penalty statutorily fixed, below the limit prescribed under section 271(1)(a). It is not necessary to go into the factual details of the matter. There was a delay in filing the return by the assessee for the assessment year 1976-77. Hence, the Income-tax Officer imposed a penalty of Rs.19, 152 for the delay in filing the return. The Commissioner of Income-tax (Appeals), on appeal, held that the assessee has shown reasonable cause for not filing the return in time and, hence, he cancelled the penalty, though he found that the penalty that would be leviable would be Rs.6,980. On further appeal by the Revenue, the Income-tax Appellate Tribunal accepted the case of the Department that there was no reasonable cause on the part of the assessee in not filing the return within the time prescribed by the statute and the finding that there was no reasonable caused on the part of the assessee for not filing the return by the Tribunal has become final. However, the Appellate Tribunal held that it was the first occasion the assessee has filed the return belatedly and having regard to the past history of the case, the Tribunal took a lenient view of the matter and reduced the penalty to Rs.1,000 though the penalty that ,would be leviable under the relevant provision if Rs.6,908. It is this order that is the subject-matter of this tax case reference.

At the time of hearing o6te tax case reference, Sri S. V. Subramaniam, learned senior standing counsel for the Department, submitted that in view of the provisions of section 271(1)(a) the penalty is leviable at the rate specified therein and the Appellate Tribunal has no jurisdiction to reduce the penalty to a sum below the one prescribed by the statute, The assessee remained un-represented and after hearing learned senior standing counsel for the Department and after perusing the records, we find that the contention of learned senior counsel for the Department has force. Under the provisions of section 271(1)(a) of the Income Tax Act, 1961, if the Income tax Officer is satisfied that an assessee has, without reasonable cause, failed to furnish the return within the time prescribed under section 139(1) or 139(2) of the Act, he may direct that such person shall pay by way of penalty, inter alia, in addition to the amount of the tax, if any, payable by them, a sum equal to two per cent of the assessed tax for every month during which the default continued. The use of the expression "equal to two percent." found in section 271(1)(a) clearly gives an indication that it should not be anything less or more than what is prescribed. The section mandates that once the authority has come to the conclusion that penalty is leviable under the provisions of section 271(1)(a), the authority exercising his powers under the Act, is bound to impose the penalty that is prescribed by the statute. The Appellate Tribunal is an authority functioning under the provisions of the Income-tax Act and after the Tribunal has recorded a finding that penalty is attracted, it has no jurisdiction to reduce the amount of penalty than the one prescribed under that section. The question whether the authorities functioning under the Act can reduce the quantum of penalty below the one prescribed by the statute, was the subject-matter of consideration in several decisions by various High Courts and the uniform view of all the High that when the section prescribes the penalty at a particular rate; the same cannot be anything less or above the one prescribed thereunder. The Supreme Court in Maya Rani Punj v. CIT (1986) 157 ITR 330, also has taken the view that it is not open to the Tribunal to reduce the penalty imposed under section 271(1)(a) of the Act to anything lower than the sum equal to two per cent of the tax assessed for every month during which the default continued. In view of the above said decision of the Supreme Court, we are of the view that the order of the Tribunal reducing the penalty to a sum of Rs.1,000 is not sustainable in law. As already stated, the section prescribes the amount of penalty that should be imposed when the assessing authority found that there was no reasonable cause for the delay on the part of the assessee in the submission of the return. The Tribunal has also confirmed the imposition of penalty. In this view of the matter, we are unable to sustain the view taken by the Appellate Tribunal that the penalty leviable would be Rs.1,000 which is less than the statutory prescription. Hence, we answer the questions referred to us in the negative and in favour of the Department. No costs

M.B.A./4032/FCQuestion answered.