Commissioner of Income Tax vs Fomra Brothers

Govindan Nair, C.J.—The question referred for our opinion reads as follows:

"Whether the Tribunal was right in holding that no penalty u/s 271(1)(a) was leviable on the assessee as no Lax was due from it on the date of imposition of penalty ?"

The relevant part of Section 271(1) reads as follows :

"(1) If the Income Tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person-

(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section fl) of Section 139 or by such notice, as the case may be, or...

he may direct that such person shall pay by way of penalty,--

(i) in the cases referred to in Clause (a),--...

(b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued ;

Explanation.--In this clause ''assessed tax'' means tax as reduced by the sum, if any, deducted at source under Chapter XVIIB or paid in advance under Chapter XVIIC;..."

It is an admitted fact that the assessee had paid advance tax under Chap. XVIIC and the amount paid was in excess of the tax assessed. In these circumstances, there is no amount on which two per cent, of the tax can be calculated for the purpose of Section 271(1)(a)(i)(b). The question considered in the decision in Commissioner of Income Tax (Central) Vs. Kandaswami Weaving Factory and Co., was different. That was a case where the payment was made not as advance tax under Chap. XVIIC but before the penalty order. That will not be a payment under Chap. XVIIC. The Explanation was, therefore, not attracted and it was held that the assessee will be liable to pay penalty. That decision will not apply to this case.

In the light of the above, we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the revenue. The assessee is entitled to costs from the revenue including counsel''s fee of Rs. 300.