TMI Blog1988 (8) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax deducted at source amounted to Rs. 40,000 approximately with the result that the assessee became entitled to refund of a considerable amount which he had deposited in excess of the tax found payable by him. In spite of this situation, the Income-tax Officer initiated penalty proceedings against the assessee on the ground of late filing of the return tinder section 271(1)(a)(i)(b) read with section 139(1) of the Act. The Income-tax Officer rejected the assessee's contention that since there was no "assessed tax" according to its meaning given in the Explanation to sub-clause (i)(b) of clause (a) of sub-section (1) of section 271, because the tax deducted at source was in excess of the amount of tax found payable by the assessee, there was no question of levying any penalty. This contention of the assessee was, however, accepted by the Commissioner (Appeals) in appeal and thereafter by the Tribunal in further appeal. Hence, this reference at the instance of the Revenue. The real question for decision is, whether any penalty can believed under section 271(1)(a)(i)(b) in the case of failure to file return within the time allowed by sub-section (1) of section 139 even when it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the argument advanced on behalf of the Revenue. In such a situation, there is no amount of tax remaining due and, therefore, nothing is required to be paid as tax due. The penalty has to be calculated at a sum equal to two per cent. of the assessed tax for every month during which the default continued. The "assessed tax" in a case like this would be zero since the tax deducted at source or paid in advance was equal to or in excess of the total tax assessed. Since the tax due is nil and so also the "assessed tax" within the meaning of that expression, any figure multiplied by zero will also be zero. The result is that even if this provision is held to be attracted to case like the present one, the amount of penalty would be zero according to the mode of calculating the penalty prescribed in it, and, therefore, in effect, no penalty can be levied. In our opinion, this logical consequence flowing from the provision itself is sufficient to indicate that no penalty can be levied under section 271(1)(a)(i)(b) in a case like the present one where the tax deducted at source or paid in advance is equal to or in excess of the amount of tax found to be payable on completion of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) and, therefore, the tax liability of an unregistered firm being greater, there would be some tax due as a result of the registered firm being treated as an unregistered firm. It was urged that on this basis, it would be possible to hold that there is some tax due on which penalty can be calculated according to the above provision. We find it difficult to accept this contention and to use it for construing section 271(1)(a)(i)(b) in the manner suggested by the Revenue. In the first place, sub-section (2) of section 271 is 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. This does not mean that for the purpose of deciding the liability for penalty under sub-section (1), effect has to be first given to sub-section (2) of section 271 in order to make the formula for calculating the penalty under sub-section (1) workable. That apart, this argument based on sub-section (2) of section 271 can obviously be relied upon for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the view taken in these decisions of the Patna High Court for the reasons already given. The Bombay High Court in CIT v. Janata Trading Co. [1984] 150 ITR 676, appears to have taken the same view that where tax found payable by the registered firm is nil, penalty can be imposed under section 271 (1) (a) for delay in filing the return because the amount of tax assessed on it as an unregistered firm by virtue of section 271(2) is to be taken into account for computing the penalty. In our opinion, the facts of the Bombay High Court decision indicate that the tax payable by the registered firm was not nil so that there was some tax due on which penalty could be calculated under section 271(1)(a)(i)(b), but by virtue of section 271(2), it was the larger amount of tax due on the assessee treating it as an unregistered firm which formed the basis of calculation of penalty. That was a case in which the amount of tax paid earlier by the assessee was the self-assessment tax under section 140A in Chapter XIV and not tax deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C which alone can be adjusted according to the meaning of "assessed tax" in the Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered firm, if any penalty was leviable on it under section 271(1)(a) ; and that where the "assessed tax" on a registered firm was nil, no penalty could be levied under section 271(1)(a) for failure to furnish the return in time. With respect, we concur with this view as already indicated by us. After the Supreme Court's decision in Ganesh Dass Sreeram's case [1988] 169 ITR 221, which has clearly held that no interest can be recovered under section 139(8) where the tax liability is nil for failure to file the return within the time allowed, it must be held that on the same reasoning that no penalty also can be imposed under section 271(1)(a)(i)(b) since the liability for payment of interest and penalty both arise on the same facts and is to be computed similarly. The Tribunal has taken the same view and, therefore, it must be upheld. Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the Tribunal was justified in taking the view that no penalty under section 271(1)(a)(i)(b) is leviable against the assessee, a registered firm, because it had no tax liability within the meaning of the expression "assessed tax" given in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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