Law:

Section:

Section 271(2), read with section 147, of the Income-tax Act, 1961 - Penalty - Registered firm - Assessment year 1959-60 - Whether at stage of assessment of tax, even in cases under section 147, tax is assessed not only on income that has escaped assessment but on total income, and out of tax so assessed any tax already paid would be deducted and tax payable would be tax assessed minus tax already paid - Held, yes - Whether, for purpose of determining amount of penalty under section 271(2), for failure of a registered firm to file its return within time pursuant to a notice under section 148, tax payable by firm in relation to which penalty is calculated, could not be reduced by amount of tax which would be payable by firm on total income determined in original assessment on footing that registration was not granted at stage of original assessment - Held, yes FACTS Penalty proceedings were initiated against the assessee under section 271(1)(a) for default in filing the return under section 148, and the amount of penalty was fixed at the rate of 2 per cent of the tax which would be payable on the total income for each month of default. The Tribunal held that for the purpose of determining the amount of penalty under section 271(2), the tax payable by the firm in relation to which the penalty was calculated, should not be reduced by the amount of tax which would be payable by the firm on the total income determined in the original assessment on the footing that registration was not granted at the stage of the original assessment. On reference : HELD For purposes of imposition of penalty under section 271(1)(a ) a registered firm is to be treated as an unregistered firm as is provided in section 271(2). Under section 147, the ITO assesses or reassesses such income as had escaped assessment. Now, in those cases where there is an earlier assessment, "such income" under section 147 would be that income which is not included in the earlier assessment. The computation of tax then has to be done under section 152. The computation of tax under this section is not limited to the income which was not included in the original assessment. When the escaped income is assessed…

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