Law:

Section:

Section 271(1) , read with section 271(2), of the Income-tax Act, 1961 – Penalty – For late filing of return – Assessment year 1964-65 – Assessee was a registered firm – Penalty under section 271(1)(a) was levied for belated filing of return – Tribunal held that no penalty was leviable since as on date of order of penalty no tax was payable by assessee – Whether in view of amendment made to section 271(1) by the Direct Taxes (Amendment) Act, 1974, with retrospective effect from 1-4-1962, penalty had to be calculated on basis of tax assessed irrespective of fact whether tax was due and outstanding on date when order imposing penalty was made or not – Held, yes – Whether, therefore, penalty was leviable on assessee – Held, yes FACTS The assessee was a registered firm. The ITO levied penalty under section 271(1)(a) for belated filing of return for the assessment year 1964-65. Assessee's appeal before the AAC was unsuccessful. On second appeal, the Tribunal following the decision of the Supreme Court in CIT v. Vegetable Products Ltd. [1973]88 ITR 192 (SC), held that no penalty was leviable since as on the date of the order of penalty no tax was payable by the assessee. On reference : HELD Subsequent to the decision of the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC), section 271(1) was amended, by the Direct Taxes (Amendment) Act, 1974, with retrospective effect, viz., from 1-4-1962. As a result of the amendment, it is made clear that the penalty had to be calculated on the basis of the tax assessed irrespective of the fact whether the tax was due and outstanding on the date when the order imposing penalty was made or not. Section 271(2) deals with the quantum of penalty imposable in the case of a registered firm or an unregistered firm which has been assessed under section 183(b) and for that purpose creates a fiction. Consequently, the effect of section 271(2) is to treat a firm like the assessee, viz., a registered firm or an unregistered firm which has been assessed under section 183(b ), as an unregistered firm and compute the income of the unregistered firm and assess the tax payable by the said unregistered firm on the income so…

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