JUDGMENT
1. The Income-tax Appellate Tribunal has referred the following two questions of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of this court :
"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was in law competent to reduce the penalty under Section 271(1)(a) to a figure lower than the 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 ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was competent to reduce the quantum of penalty below the minimum prescribed in Section 271(1)(a) of the Income-tax Act, 1961 ?"
2. Briefly stated, the facts giving rise to the present reference are as follows:
3. The respondent-assessee is an individual and the matter pertains to the assessment year 1948-49, accounting year ending in September, 1947. By a notice under Section 148 of the Act, the respondent-assessee was required to file his return for the year under reference on or before May 5, 1973. However, it was filed on September 20, 1974. The Income-tax Officer initiated proceedings under Section 274 read with Section 271(1)(a) of the Act and issued a .notice to show cause as to why penalty should not be imposed for the late submission of the return. The respondent-assessee in his reply submitted that the default was technical as it was pointed out that the same income be assessed which was originally assessed for the assessment year 1948-49. The Income-tax Officer being dissatisfied with the explanation, imposed a penalty of Rs. 51,148.00 under Section 271(1)(a) of the Act vide his order dated March 26, 1977. In appeal, the Appellate Assistant Commissioner confirmed the penalty imposed on the respondent-assessee. The respondent-assessee feeling aggrieved preferred an appeal before the Tribunal. The Tribunal though found that there was no infirmity in the order as the respondent-assessee had failed to show any reasonable cause for not filing the return in time, yet reduced the penalty to Rs. 2,000 as a token penalty, to meet the ends of justice.
4. We have heard Sri A. N. Mahajan, learned standing counsel appearing for the Revenue. Nobody has put in appearance on behalf of the respondent-assessee.
5. Sri Mahajan submitted that the law fixes the minimum and maximum penalty which is to be imposed in a given set of circumstances and it is not open to the authorities constituted under the Act to impose penalty of an amount which is less than the minimum prescribed under the Act. He relied upon a Division Bench decision of this court in the case of CIT v. Ram Murti [1973] 87 ITR 577 ; a Division Bench decision of the Delhi High Court in the case of CIT v. Maya Rani Punj LIR 1973 DELHI 605; a decision of the hon'ble Supreme Court in the case of Maya Rani Punj v. CIT [1986] 157 ITR 330 ; and a Division Bench decision of the hon'ble Madras High Court in the case of CIT v. J. Stead and Co. P. Ltd. [1998] 234 ITR 730.
6. In the case of Ram Murti [1973] 87 ITR 577, this court has held as follows (page 580) :
"Where the Income-tax Officer considers it to be a case attracting penalty, he must follow the terms of that provision as to the quantum of penalty. The provision requires that the quantum should be 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. The rate at which the penalty must be computed is clearly laid down. To our mind, it is not variable. If that is so for the Income-tax Officer, then equally it is so for the Tribunal. If Parliament had at all intended to vest a power in the Tribunal to reduce or waive the penalty it would have clearly and expressly done so. It has done so in the case of the Commissioner of Income-tax by enacting Section 271(4A)."
7 After referring to a decision of the Calcutta High Court in the case of CIT v. A. K. Das [1970] 77 ITR 31, this court has held that while disposing of an appeal against a penalty order made under Section 271(1)(a) of the Act, the Tribunal must determine the quantum of penalty applying the rate of two per cent, so however that the quantum does not exceed 50 per cent, of the tax.
8 In the case of Maya Rani Punj [1973] 92 ITR 394, the hon'ble Delhi High Court has held that the Tribunal is not competent to reduce the penalty levied under Section 271(1)(a) of the Act to a figure lower than the 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.
9 The decision of the hon'ble Delhi High Court in the case of Maya Rani Punj [1973] 92 ITR 394 has been affirmed by the hon'ble Supreme Court in the case of Maya Rani Punj [1986] 157 ITR 330.
10 The hon'ble Madras High Court in the case of J. Stead and Co. P. Ltd. [1998] 234 ITR 730, has followed the decision of the hon'ble Supreme Court and following the decision of the hon'ble Supreme Court in the case of Maya Rani Punj [1986] 157 ITR 330 has held as under (page 732) :
"The use of the expression 'equal to two per cent.' found in Section 271(1)(a) clearly gives an indication that it should not be anything less or more than what is prescribed. The section mandates that once the authority has come to the conclusion that penalty is leviable under the provisions of Section 271(1)(a), the authority exercising his powers under the Act, is bound to impose the penalty that is prescribed by the statute. The Appellate Tribunal is an authority functioning under the provisions of the Income-tax Act and after the Tribunal has recorded a finding that penalty is attracted, it has no jurisdiction to reduce the amount of penalty than the one prescribed under that section. The question whether the authorities functioning under the Act can reduce the quantum of penalty below the one prescribed by the statute, was the subject-matter of consideration in several decisions by various High Courts and the uniform view of all the High Courts is that when the section prescribes the penalty at a particular rate, the same cannot be anything less or above the one prescribed thereunder. The Supreme Court in Maya Rani Punj v. CIT [1986] 157 ITR 330, also has taken the view that it is not open to the Tribunal to reduce the penalty imposed under Section 271(1)(a) of the Act to anything lower than the sum equal to two per cent, of the tax assessed for every month during which the default continued."
11. We are in respectful agreement with the decisions, referred to above, and hold that the Tribunal was not justified in reducing the penalty below the minimum prescribed under Section 271(1)(a) of the Act.
12. In view of the foregoing discussions, we answer both the questions of law in the negative, i.e., in favour of the Revenue and against the respondent-assessee. Since nobody has appeared on behalf of the respondent-assessee, there shall be no order as to costs.