TMI Blog1996 (6) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer in the course of assessment proceedings initiated penalty proceedings for late filing of the returns. The assessee submitted an explanation to the effect that the delay was on account of non-finalisation of the accounts by the accountant. The explanation was not accepted by the Income-tax Officer, who imposed penalty under section 271(1)(a) amounting to Rs. 3,108, Rs. 190, Rs. 832, and Rs. 4,990 for the assessment years in question, respectively. The Appellate Assistant Commissioner on appeal preferred by the assessee took the view that since the tax assessed was less than the tax paid by way of advance tax and upon completion of assessment refund had also been granted by the Income-tax Officer, no penalty under section 271(1)(a)(i) could be imposed. The Appellate Assistant Commissioner also accepted the case of the assessee regarding late filing of the returns on facts. He, accordingly, cancelled the penalties. It was the turn of the Revenue to go in appeal before the Income-tax Appellate Tribunal. The Tribunal, following the decisions of the Madras High Court in Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99 and CIT v. Fomra Bros. [1980] 122 ITR 312 and a decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 152 ITR 261. While dealing with a somewhat similar question this court held : " Legal fiction which is created by sub-section (2) of section 271 is independent of the tax liability. Once it is found that there is a default so as to attract the penal provisions under section 271(1)(a), sub-section (2) of section 271 shall come into play. If the assessee is a registered firm, the legal fiction created by it shall not permit to give to the assessee benefits of its being a registered firm. The assessee must answer the requirements as if it is not a registered firm. Its assessed tax for the purpose of imposition of penalty shall be that which shall be determined on the footing that it is not a registered firm." It would appear that the decisions of the Madras High Court in Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99 and the Gauhati High Court in CIT v. Maskara Tea Estate [1981] 130 ITR 955 were brought to the notice of the court. The learned judges, however, dissented from the same and chose to follow the decisions of the Calcutta High Court in CIT v. Priya Gopal Bishoyee [1981] 127 ITR 778, the Madhya Pradesh High Court in Delux Publishing Co. v. Addl. CIT [1981] 127 ITR 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able under sub-section (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm." (emphasis added). It would, thus, appear that both in the matter of charging of interest and imposing penalty the two provisions aforesaid provide, by legal fiction, that the interest or penalty, as the case may be, is to be determined treating a registered firm as unregistered firm, that is, as if the firm were an unregistered firm. The Supreme Court did not uphold the challenge to the vires of the provisions of clause (iii)(a) of the proviso but observed (at page 230 of 169 ITR) : " Before we part with these appeals, we think we should clarify one situation, namely, where the advance tax duly paid covers the entire amount of tax assessed, there is no question of charging the registered firm with interest even though the return is filed by it beyond the time allowed, regard being had to the fact that payment of interest is only compensatory in nature. As the entire amount of tax is paid by way of advance tax, the question of payment of any compensation does not arise." These observations have been interpreted unanimously by different High Courts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of this court. It rather chose to follow the decision in CIT v. Fomra Bros. [1980] 122 ITR 312 (Mad) and Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99 (Mad), which had been unsuccessfully cited before this court, as they were found to be in tune with the decision of the Supreme Court in Ganesh Dass Sreeram's case [1988] 169 ITR 221. The above decision of the Rajasthan High Court in Builders Engineers Co.'s case [1989] 175 ITR 317 has since been followed by the Punjab and Haryana High Court in CIT v. Braham Prakash and Co. [1989] 179 ITR 422, the Orissa High Court in CIT v. Permilla Singh and Co. [1994] 207 ITR 887 and the Calcutta High Court in CIT v. Deepak Trading Co. [1994] 208 ITR 304. In Permilla Singh and Co.'s case [1994] 207 ITR 887, the Orissa High Court held : " The provisions of sub-section (2) of section 271 are attracted for quantification of the penalty only when it is imposable under sub-section (1). In that event, the registered firm loses the benefit of registration, and the penalty for which it has become liable has to be calculated depriving it of the benefit of registration and treating it as an unregistered firm. While deciding the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X
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