Law:

Section:

Section 271(1)(i)(a ), read with section 271(2), of the income-tax act, 1961-Penalty-For late filing of return-Assessee, a registered firm, filed return belatedly-Whether since assessed tax of assessee-firm as registered firm was less than advance tax paid, penalty could not be imposed by invoking section 271(2)-Held, on facts, yes Facts The assessee, a registered firm, defaulted in filing its returns for two years. The tax assessed for both years treating it as a registered firm was less than the advance tax paid by the firm. However, while levying penalty for late filing of return, the ITO invoked the provisions of section 271(2) and levied penalty under section 271(1)(i)( a) at the rate of 2 per cent per month for the period of default. On appeal, the AAC set aside the penalty order holding that in view of the Explanationto section 271(1)(i)( a), there was nothing to act upon insofar as penalty was concerned because the assessed tax came to a negative figure for both the years. Before the Tribunal, the revenue contended that once a default was committed by a registered firm in furnishing returns in time without reasonable cause, it had to undergo penalty as provided in section 271(2). This contention was rejected by the Tribunal and the AAC's order was upheld. On reference : Held Sub-section (2) of section 271 operates only when a person is liable to penalty. This liability to penalty has to be determined with reference to what has been stated in sub-section ( 1) and that too, not by confining one's attention to clause (i)(a) but also by adverting to clause (i)(b) read with its Explanation. If it is so done, and if the advance tax is more than that of tax determined as payable, the resultant figure of 'assessed tax has to be in negative and there would be nothing to calculate the penalty. To arrive at the figure of 'assessed tax', the assessment to be taken note of must be that of the firm as registered firm, if the firm had, in fact, been assessed in that capacity. The expression 'assessed tax', as it found place in the section by virtue of the 1974 amendment, has to be understood as the amount to which a person was actually taxed (minus advance payment,…

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