Commissioner of Income Tax vs N.G.K. Electrical Industries

Bharucha, J.—The question that we are asked to consider in this reference u/s 256(1) of the Income Tax Act, 1961, at the instance of the assessee reads thus :

"Whether, on the facts and in the circumstances of the case, and in view of the combined reading of the provisions of section 271(1)(a) and section 271(2) of the Income Tax Act, 1961, the Tribunal was justified in cancelling the penalty ?"

Counsel are agreed that, as far as this court is concerned, the question must be answered in the negative and in favour of the Revenue in view of the judgment of this court in Commissioner of Income Tax, Poona Vs. Janata Trading Co., .

In that matter, this court followed the reasoning of the Calcutta High Court Commissioner of Income Tax Vs. Priya Gopal Bishoyee, , and stated that this court was in respectful agreement therewith.

We have been told that some High Courts have taken a similar view while others have taken a different view.

We have been taken through the provisions of section 271. The earlier part of sub-section (1) thereof provides as to when a penalty may be levied; the letter part, as to how it must be calculated. Sub-section (2) makes a special provision regarding registered firms. As we see it, sub-section (2) is applicable to a firm found to be liable to penalty under sub-section (1) because it satisfies the requirements of one or the other of clauses (a) to (c) of sub-section (1). Penalty, if imposed on that firm, must then be calculated on the basis that it is an unregistered firm. It does not appear to us to be correct to say that no penalty can be imposed on a registered firm because the penalty as calculated under the provisions of the latter portion of sub-section (1) upon the basis that it is a registered firm would be nil.

Accordingly, the question is answered in the negative and in favour of the Revenue there shall be no order as to costs.