CIT KERALA Vs. MALANGADAN TIMBER TRADERS

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Madras Bench 'B', has stated two cases in relation to the assessment years 1960-61 and 1961-62 and has referred the following common question arising for the two years for our decision.

(2.) The assessee, a firm, was registered by certificate issued on 26-3-1962 for the assessment year 1960-61. The firm was constituted on 19-1-1960 and the application under S.26A of the Indian Income Tax Act, 1922, was on 1-3-1960. The application was therefore in conformity with the rules framed under S.59 of the Income Tax Act, 1922, and it is clear from R.4 that the certificate of registration will have effect for the assessment year ending on 31st March, 1961. The registration of the firm had been renewed for the year 1961-62 as well. For the two years returns were submitted by the firm only on 21-6-1961 and 6-4-1962 respectively. Admittedly these returns bad been submitted out of time. Penalty was therefore sought to be imposed on the firm under S.28(1)(a) of the Income Tax Act, 1922, for not having complied with S.22(1) of the Act. Though the Income Tax Officer imposed penalty for the two years the Appellate Assistant Commissioner set aside the orders imposing penalty on the ground that the firm, which was duly registered under the Act, had no income in excess of the maximum amount not chargeable to income tax during the two corresponding previous years to the assessment years 1960-61 and 1961-62. It was therefore held that there was no obligation on the part of the firm to file any return. Consequently it was held that no penalty can be imposed under S.28(1)(a). The contention raised was that at the time (when the returns should have been filed) the firm was obliged to file the returns under S.22(1) as it could not be taken to have been registered then, the certificate of registration being dated 26-3-1962, a date after the dates before which the returns should have been submitted. It was held that the registration will have effect for the assessment year and must therefore govern the provision relating to the submission of returns for that assessment year. This view of the Appellate Assistant Commissioner has been accepted by the Income Tax Appellate Tribunal. This view is contested before us by counsel on behalf of the revenue.

(3.) We have been referred to various sections of the Indian Income tax Act, 1922, such as S.23(5), 26 and 28 proviso (d) and it is submitted that the income of the firm atleast in so far as the shares of its partners are concerned are liable to be taxed under S.23(5) and that when penalty is to be imposed, the quantum of the penalty has got to be determined as indicated in clause (d) of the proviso to S.28(1) and that this clause clearly indicates that even in cases where no tax can be imposed as such on the firm, a penalty can be imposed on the firm. Reliance has also been placed on the two decisions, one of the Calcutta High Court in Khusiram Murarilal v. Commissioner of Income Tax, Central, Calcutta reported in 1954 (25) ITR 572 and the other of the Supreme Court in Commissioner of Income tax, Madras and another v. S. V. Angidi Chettiar reported in 1962 (44) ITR 739 in support of the contentions urged.