ESSORDE INDUSTRIAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference made under Section 256(1) of the INcome-tax Act, 1961, the following question of law has been referred for the opinion of this court:

(2.) THE facts are in a narrow compass. THE assessee is a firm constituted under a deed of partnership executed on May 10, 1960. It closed its accounts for the first time on June 30, 1961. For the assessment year 1962-63, the return of income was due by June 30, 1962. It was, however, filed only on February 28, 1964. THE firm applied for registration for the purposes of assessment to income-tax for 1962-63. However, the firm was not registered. In making the assessment on the firm on February 19, 1966, the Income-tax Officer determined the total income of the firm at Rs. 38,475. He stated in the assessment order that the firm was treated as registered firm under the provisions of Section 183(b) of the Income-tax Act. Subsequently, penalty proceedings were taken for the failure of the assessee to submit the return of income within the time allowed under the law. THE Income-tax Officer, after considering the assessee's explanation, which is not material for our present purpose, held that the assessee was liable for penalty, and he, therefore, levied a sum of Rs. 3,324 as penalty by his order dated February 15, 1968. THE Appellate Assistant Commissioner, on appeal by the assessee, found that on account of disputes among the partners, the return of income was not filed in time, and having regard to the circumstances noticed by him, he directed that the penalty leviable should be reduced to 10 per cent. of the tax payable. THE department filed an appeal to the Tribunal against the order of the Appellate Assistant Commissioner reducing the penalty in the manner done above. THE assessee preferred certain cross-objections. However, at the time of the hearing, the assessee took up certain legal submissions in the form of additional grounds. Those submissions were that the assessee having been treated as a registered firm under Section 183(b) of the Income-tax Act, no penalty was leviable under Section 271(1)(a) of the Act, and that no tax having been found to be payable by the assessee which was assessed under Section 183(b) of the Act, the penalty imposable as proportion of the tax would be nil. THE Tribunal rejected these contentions and held that the assessee was an unregistered firm treated as a registered firm only for the purpose of Section 183(b) of the Act and that for the purpose of liability to penalty, the assessee should be treated as an unregistered firm. It, therefore, allowed the appeal of the department and confirmed the levy of penalty as made by the Income-tax Officer. It is this order of the Tribunal that is challenged by the assessee in the form of the question set out already.

(3.) THIS provision has application only to a case where there has been a failure to submit a return in accordance with the provisions of Section 139(1) of the Act and has no application to the case of a delayed return. Therefore, Section 271(3)(a) of the Act was rightly treated as not standing in the way of the penalty being levied in the case. In view of the above, the question referred to us is answered in the affirmative and against the assessee. There will be no order as to costs.