Law:

Section:

Section 271(1)(a), read with sections 271(2) and 280-O, of the income-tax act, 1961-Penalty-For late filing of return-Assessee, a registered firm, filed its return belatedly - ito levied penalty treating it as unregistered firm in terms of section 271(2)-tribunal confirmed penalty in principle but while determining its quantum allowed deduction under section 280-o of amount of annuity deposit which would have been payable by assessee had it been an unregistered firm, though no deposit was actually made-whether justified-held, on facts, yes Facts For the assessment year 1966-67, penalty was imposed on the assessee, a registered firm, for filing its return belatedly. The Tribunal, upholding the imposition of penalty in principle, held that in calculating the amount of penalty, the tax payable should be determined after giving a deduction in respect of the annuity deposit payable under section 280-O, though it had not been actually paid by the assessee. On reference: Held There is no dispute that the assessee became liable to the payment of penalty for late submission of its return under section 271(2). However, where a registered firm becomes liable to penalty, a fiction is introduced that the said registered firm is to be treated as an unregistered firm. If such a fiction is introduced, then it should be carried to its logical conclusion, implying thereby that in the computation of its total income, the assessee would be entitled to a deduction of an amount equivalent to the annuity deposit which it would have had to pay had it been an unregistered firm. Once the assessee-firm was treated for the purposes of penalty as an unregistered firm, it should not be denied the benefits by way of deduction under section 280-O available to an unregistered firm. Case review CIT v. Palaniappa Transports [1980] 124 ITR 634 (Mad.), Addl. CIT v. Khanchand Thakurdas [1978] 114 ITR 223 (Kar.) and CIT v. Gujarat Automobiles [1976] 105 ITR 588 (Guj.) relied upon. IT REFERENCE NO. 186 OF 1973. Cases referred to CIT v. Gujarat Automobiles [1976] 105 ITR 588 (Guj.), Addl, CIT v. Khanchand Thakurdas [1998] 114 ITR 223 (Kar.) and CIT v. Palaniappa Transports [1980] 124 ITR 634 (Mad.).…

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