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Section 271(1)(a) read with section 275(1), of the income-tax act, 1961-Penalty-For late filing of return-Assessment years 1960-61 and 1961-62-Assessee filed belated returns-Assessments completed and penalty proceedings initiated on 30-11-1963-Penalty levied at the rate of two per cent of tax payable for each month of default-Whether tribunal justified in holding that penalty provisions under the 1922 act applicable and reducing penalty-Held, no-Whether provisions of section 275(1) had been complied with-Held, yes Facts The assessee filed his returns for the assessment years 1960-61 and 1961-62 on 2-11-1962 and 8-3-1963, respectively. The assessments were completed on 30-11-1963. For default under section 271(1)(a ), the ITO levied on 19-10-1964 penalty of Rs. 3,276 and Rs. 2,328 for the assessment years 1960-61 and 1961-62, respectively, calculating the same at the rate of 2 per cent of the tax payable for each month of default. The AAC confirmed the ITO's order. The Tribunal sustained the levy of penalty but considering that the defaults had been committed when the 1922 Act was in force, it reduced the quantum to Rs. 300 per year holding that the penalty could be levied only in consonance with that Act. It also rejected the assessee's contention that the provisions of section 275(1) had not been complied with. On reference : Held 1. The ITO had a discretion to levy or not to levy penalty under section 271(1)(a), but once a decision to levy penalty had been taken, the ITO had no alternative other than imposing a penalty calculated at the rate of 2 per cent of the tax payable for each month during which the default continued. He had no discretion to levy a higher or lower penalty. The Tribunal was, therefore, not justified in reducing the quantum of penalty. 2. In this case the penalty proceedings were initiated before completion of assessment. The show-cause notices had been actually issued on the date of assessment, i.e., 30-11-1963 and penalty orders were passed on 19-10-1964 (before the expiry of two years from the date of completion of proceedings) and the provisions of section 275(1) had been duly complied with. Case review CIT v. Maya Rani Punj [1973] 92…

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