Law: Income Tax Act, 1961

Section: 256,271

Income-tax----Reference---Penalty---Delay in filing return---Firm---Penalty under 0.271(2) read with S.271(1)(a)(i) ;Whether "assessed tax" in S.271(1)(i)(b) has to be construed de hors the Explanation thereto---Whether advance tax payable as unregistered firm is deductible for quantifying the penalty---Are questions of law to be referred---Indian Income Tax Act, 1961, Ss.256(2) & 271. The assessee, a registered firm, was subjected to penalty under section 271(1)(a) of the Income Tax Act, 1961, for the delay in filing the return of income by treating it as an unregistered firm. On appeal, the Tribunal allowed the appeal of the assessee holding that once the registered firm is treated as an unregistered firm for levying penalty, all incidental consequences should follow and, therefore, the rate of tax applicable to an unregistered firm and the amount of advance tax referable to an unregistered firm, whether paid or not, becomes applicable. The Tribunal rejected the reference application of the Commissioner. On an application by the Revenue to the High Court to direct a reference: Held, allowing the application, whether the term "assessed tax" in section 271(1)(i)(b) had to be construed de hors the Explanation thereto and whether advance tax payable by an unregistered firm should be deducted, but not advance tax paid as registered firm for quantifying the penalty under section 271(2) read with section 271(1)(i)(b) were questions of law to be referred. CIT v. Om Trading Co. (1996) 220 ITR 149 (AP); CWT v. Executors of Late D.T. Udeshi (1991) 189 ITR 319 (Bom.) and Venkata Krishnayya Naidu and Son v. CIT (1984) 150 ITR 545 (AP) ref. JUDGMENT P. VENKATARAMA REDDY, J.---The Commissioner of Incometax, Andhra Pradesh-II, seeks reference of the following two questions of law arising out of the orders of the Income-tax Appellate Tribunal by which the Tribunal accepted the assessees contention regarding the mode of calculation of penalty payable: "(1) Whether the Income-tax Appellate Tribunal was correct in law in holding that in view of the non-obstante clause found in section 271(2) of the Income Tax Act, 1961, the term assessed tax occurring in section 271(1)(i)(b)…

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