Commissioner of Income Tax vs Varinder Kumar

S.P. Goyal, J.—This judgment will dispose of two cases, Income Tax References Nos. 29 and 30 of 1977, which involve a common question of law. For the purpose of this judgment, the facts of Income Tax Reference No. 29 of 1977 have been noticed.

A penalty of Rs. 4,665 was imposed by the Income Tax Officer on the assessee u/s 271(1)(a) of the Income Tax Act for not filing the return in response to the notice issued u/s 139(2) within the period allowed. The amount of penalty was reduced on appeal by the Appellate Assistant Commissioner to Rs. 1,555. Before the Tribunal, apart from urging that there was a reasonable excuse for the late filing of the return, the assessee also contended that in addition to the payment of Rs, 1,308 as advance tax, he had also paid a sum of Rs. 8,500 as tax u/s 141 of the Income Tax Act and, as such, the penalty could be imposed, if at all, only on the balance amount of Rs. 3,606 which was payable by him. The plea of reasonable excuse was turned down but the latter contention was upheld by the Tribunal and the penalty was ordered to be imposed at the rate of two per cent. per month on the sum of Rs. 3,606. The Revenue, dissatisfied with this order, got the following question referred for the opinion of this court:

"Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that in calculating the penalty leviable u/s 271(1)(a)(i) of the I.T. Act, 1961, the amount paid by the assessee u/s 141 of the I.T. Act, 1961, was to be deducted from the amount of tax determined u/s 143(3) of the I.T. Act, 1961, in order to determine the amount of tax on which the computation of penalty was to be based ? "

The view of the Tribunal was based on the unamended provision of Section 271(1)(a) of the Income Tax Act, when the words used therein were, "in addition to the amount of tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued but not exceeding in the aggregate 50 per cent. of the tax". By the amendment brought about in the year 1974, instead of the words "tax payable", the words "tax assessed" were substituted. A Division Bench of this court in CIT v. Mangat Ram Kuthiala [1978] 111 ITR 823, while interpreting the said provision held that the said amendment has been made retrospective and has to be deemed to have always been in force. The same view was reiterated in Commissioner of Income Tax Vs. Patram Dass Raja Ram Beri, , and it was held that the amount paid under provisional assessment u/s 23B of the Indian Income Tax Act, 1922 (now Section 141 of the Income Tax Act, 1961), cannot be deducted for calculating the penalty. These references thus stand concluded by the above-noted two decisions of this court and are accordingly answered in the negative, i.e., in favour of the Revenue and against the assessee. No costs.