Commissioner of Income Tax, Lucknow vs Basudeo and Co.

R.K. Agrawal, J.—The income tax Appellate Tribunal, Allahabad has referred the following questions of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as the Act) for opinion of this Court. Whether on the facts and circumstances of the case the income tax Appellate Tribunal was justified in upholding order of A.A.C., who had cancelled the penalty levied by the I.T.O. u/s 271(1)(a) read with section 271(2) of the income tax Act, 1961?

The reference related to the assessment years 1979-80 to 1982-83 in respect of the penalty proceedings u/s 271(1)(a) of the Act.

Briefly stated the facts giving rise of the present reference are as follows:

The respondent assessee filed return for the assessment years 1979-80 to 1982-83 after the due date had expired therefore, income tax Officer initiated proceedings for levying penalty u/s 271(1)(a) of the Act. The show cause notice issued by the income tax Officer remained unreplied and, therefore, he drew a conclusion that the respondent assessee had no reasonable explanation to offer in his defence and consequently imposed penalty in respect of each assessment years in question. The penalty orders were challenged in. separate appeals by the assessee. The plea taken by before the Appellate Assistant Commissioner was that the respondent assessee''s source of income contractual receipts for supply of bricks to Government Department where payment was made after deducting tax at the rate of 2% of contractual receipt at source was more than the tax payable by the respondent assessee and, therefore, no penalty was leviable. The Assistant Appellate Commissioner agreed with the contention of the assessee and deleted the penalty which order has been affirmed by the Tribunal.

We have heard Sri A.N. Mahajan, learned counsel appearing for the Revenue and Sri Pawan Shree Agarwal, learned counsel for the respondent assessee.

Sri A.N. Mahajan, learned counsel for the Revenue submitted that for the purpose of imposition of penalty the tax, which a registered firm has paid and/or which has been deducted at source must be calculated on the basis that it was an unregistered firm. The assessee paid less taxes which are payable by an unregistered firm, therefore, the penalty was rightly imposed. In support of his plea he placed reliance upon the two decisions of this Court in the case of Ram Bilas Purshottam Dass Vs. Commissioner of Income Tax, and The Commissioner of Income Tax Vs. Chanda Radio, . In both the cases this Court has held that for purpose of imposition of penalty on a registered firm, the tax which may be payable by the assessee is to be determined on the basis that the assessee is an unregistered firm.

Sri Agarwal, learned counsel for the assessee could not distinguish the ratio laid down by this Court in the aforesaid two cases.

Respectfully following the aforesaid two decision of this Court, we are of considered opinion that the Tribunal misdirected itself in quashing the penalty by treating that the tax deducted at source was more than the tax calculated on the assessed income and by treating the assessee''s firm as registered one. We, accordingly, answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee. There will be no order as to costs.