ORDER--High Court cannot go into same.
HELD :
The assessee urged that the quantum of penalty to which the assessee was subjected, was excessive. The quantum of penalty within the statutory limit that ought to be imposed in a given case is necessarily a question of fact to be determined by the IT Authorities. There is no sufficient material available on the basis of which the contention raised could be determined. No such plea was raised before the Tribunal. No such question was canvassed before the Tribunal nor any such question was sought by the assessee in the application under s. 256(1). The court cannot go into a question which was not raised before the Tribunal nor considered by it.
Income Tax Act 1961 s.256 Penalty under s. 271(1)(a)--REASONABLE CAUSE--Failure to make out--Penalty rightly determined on registered firm--Penalty to be determined after deducting advance tax from tax computed in status of URF.
HELD :
Sec. 271(2) provides for a contingency when the person committing default under cl. (a) of s. 271 happens to be a registered firm and it is exposed to liability of paying penalty because of such default. The said provision introduces a legal fiction for the purpose of quantification of penalty in case of a registered firm. It says that where a person liable to penalty is a registered firm or an unregistered firm has been assessed under cl. (b) of s. 183, then notwithstanding anything contained in the other provisions of the Act, the penalty impossible under sub-s.
(1) of s. 271 shall be the same amount as would have been imposed upon it if that firm were a unregistered firm.-Delux Publishing Co. v. Addl. CIT (1981) 127 ITR 782 (MP) relied on.-Not to current assessment years.
Income Tax Act 1961 s.271(1)(a) Income Tax Act 1961 s.271(2) JUDGMENT R.K. Gulati, J.
1. The Income-tax Appellate Tribunal has referred the following question under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act") ;
" Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was legally correct in holding that the assessee, a registered firm, has to be treated as an unregistered firm for the purposes of levy of penalty under Section 271(1)(a) of the Income-tax Act, 1961 ?"
2. The assessee is a registered firm and was assessed to tax in that status. It was required to file its return of income for the assessment year 1976-77 on or before July 31, 1976. The return was, however, filed after a delay of seven completed months from the due date. The Income-tax Officer initiated penalty proceedings under Section 271(1)(a) of the Act. After taking into consideration the explanation furnished by the assessee, the Income-tax Officer held that the assessee had failed to make out a reasonable cause for the delay in furnishing its return. The Income-tax Officer, therefore, subjected the assessee to a penalty of Rs. 8,120 being the amount, at the rate of 2 per cent. of the tax payable for each month of the default, treating the assessee as an unregistered firm.
3. The order of imposition of penalty was upheld in appeal by the Commissioner of Income-tax (Appeals). On further appeal, the Income-tax Appellate Tribunal allowed the appeal in part, inasmuch as it directed that the amount of penalty be determined after deducting the advance tax paid from the tax computed in the status of an unregistered firm.
4. On the above facts, at the instance of the assessee, the Income-tax Appellate Tribunal has referred the question set out earlier for the opinion-of this court.
5. We have heard learned counsel for the parties. The question that falls for consideration is that where a registered firm is exposed to liability by committing default contemplated under Section 271(1)(a) of the Act, could the penalty imposable under Sub-section (1) be computed, treating such a firm fictionally as an unregistered firm for such imposition ?
6. Before examining the question, we may refer to the relevant statutory provisions. Section 271 of the Act, in so far as it is relevant for this case, reads as under :
" 271. (1) If the Income-tax Officer ... in the course of any proceedings under this Act, is satisfied that any person -
(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or ...
he may direct that such person shall pay by way of penalty, -
(1) in the cases referred to in Clause (a),--
(a) in the case of a person referred to in Sub-section (4A) of Section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent. of the total income computed under this Act without giving effect to the provisions of Sections 11 and 12, for each year or part thereof during which the default continued ;
(b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued :
Explanation.--In this clause, 'assessed tax' means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C . . .
(2) When the person liable to penalty is a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, then, notwithstanding anything contained in the other provisions of this Act, the penally imposable under Sub-section (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. "
7. It is apparent that Section 271(1)(a) envisages imposition of penalty for failure to file the return of total income or delayed filing of return without reasonable cause and also for failure to file it in the manner and within the time required. The parameter for levy of penalty is the period of delay, viz., default in filing the return of total income without reasonable cause. The quantum of penalty is provided in Section 271(1)(a)(i)(b) which would show that, in addition to the amount of tax, if any, payable by an assessee, a sum equal to 2 per cent. of the assessed tax for every month during which the default continued, has to be charged as penalty. The imposition of the penalty is linked with the assessed tax. The meaning to be assigned to the expression " assessed tax" is clarified in the Explanation appended to the above provisions which, in turn, provide that assessed tax means tax as reduced by the sum, if any, deducted at source or paid as advance tax. Section 271(2) provides for a contingency when the person committing the default under Clause (a) of Section 271 happens to be a registered firm and it is exposed to liability of paying penalty because of such default. The said provision introduces a legal fiction for the purpose of quantification of penalty in the case of a registered firm. It says that where a person liable to penalty is a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, then, notwithstanding anything contained in the other provisions of the Act, the penalty imposable under Sub-section (1) of Section 271 shall be the same amount as would have been imposed upon it if that firm were an unregistered firm. In Delux Publishing Co. v. Addl. CIT [1981] 127 ITR 782, a Bench of the Madhya Pradesh High Court held as under (at page 786 ) :
" By Section 271(2) of the Act, a fiction is created and even if the person liable to penalty is a registered firm, the penalty imposable under Section 271 of the Act shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. Therefore, in the case of a registered firm the tax assessable has to be worked out as if it were an unregistered firm and on that basis the penalty has to be calculated because the fiction created has to be carried to its logical extent ... In our opinion, in cases covered by Section 271(2) of the Act, in order to calculate the penalty, the tax payable by the asscssee on the income assessed has to be determined on the basis that the assessee is an unregistered firm and the penalty has to be calculated on the tax so determined."
8. A similar view has been expressed by other High Courts also. It is not necessary to multiply the decisions.
9. The legal position is that the penalty exigible for delay or default in furnishing the return of income shall be two per cent. for every month during which the default continued and the quantum of penalty is to be calculated with reference to the "assessed tax", i.e., tax payable on total income, as reduced by the sum, if any, deducted at source or paid as advance tax. However, if the defaulter is a registered firm, for the purpose of imposition of penalty, the firm is to be treated as an unregistered firm and, so treated, the " assessed tax" must be calculated on the basis that it was an unregistered firm.
10. Now, adverting to the facts of the present case, admittedly, there was a delay of seven months in filing the return of income. The cause shown by the assessee was not found acceptable. From the order of the Commissioner of Income-tax (Appeals), it is apparent that there was an amount of assessed tax payable as a registered firm at the time when the assessment took place and at the stage when the notice of demand was issued after adjustment of the tax deducted at source or the amount paid in advance. In that event, applying the provisions of Sub-section (2) of Section 271, the quantum of penalty imposable upon the assessee had to be calculated on the basis of the tax payable by the assessee as if it were an unregistered firm. This is what had been done in the instant case and the action was upheld by the Income-tax Appellate Tribunal. There was no infirmity in the approach adopted by the Income-tax Appellate Tribunal when it directed that the assessee, a registered firm, was to be treated as an unregistered firm for imposition of penalty under Section 271 of the Act.
11. It seems that there is some conflict in the judicial opinion on the question whether a registered firm would be liable to penalty under Section 271(1)(a) where it had paid the entire amount of tax assessed on it by way of advance tax or as tax deducted at source. As we are not concerned with such a situation in the instant case, it is not necessary for us to refer to the points on which the controversy exists.
12. In the alternative, learned counsel for the assessee urged that the quantum of penalty to which the assessee was subjected was excessive. We are afraid we cannot accept this contention. In the first instance, the quantum of penalty within the statutory limit that ought to be imposed in a given case is necessarily a question of fact to be determined by the income-tax authorities. There is no sufficient material available on the file of this case on the basis of which the contention raised before us could be determined. We may also notice that no such plea was raised before the Income-tax Appellate Tribunal. The only question that had been raised before the Income-tax Appellate Tribunal was that the advance tax paid by the assessee should have been deducted from the tax computed in the status of an unregistered firm. The Tribunal accepted that plea and directed the Income-tax Officer to recompute the penalty after deducting the advance tax paid as claimed by the assessee. The further question that the quantum of penalty was excessive or not does not arise from the order of the Income-tax Appellate Tribunal. No such question was canvassed before the Income-tax Appellate Tribunal nor was any such question sought by the assessee in the application under Section 256(1) of the Act. It is settled that this court cannot go into a question which was not raised before the Income-tax Appellate Tribunal nor considered by it. The alternate contention is, accordingly, rejected.
13. For what has been discussed above, we answer the question in the affirmative, in favour of the Revenue and against the assessee. The Revenue will be entitled to costs which we assess at Rs. 250.