WAHEED AND COMPANY Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) BY this petition under Art. 226 of the Constitution of India, the petitioner seeks a writ of certiorari to quash an order dt. 10th March, 1988 passed by the ITO, Central Circle, Kanpur levying a penalty of Rs. 4,89,982 under S. 271(1)(a) of the IT Act, 1961 (hereinafter referred to as 'the Act') for asst. yr. 1984-85 and an order dt. 12th March, 1995 passed by the CIT(Central), Kanpur by which he dismissed the revision petition under S. 264 of the Act against the first-mentioned orders.

(2.) I have heard Sri Rajiv Sharma, learned counsel for the petitioner and Sri Rajesh Kumar Agarwal, learned standing counsel for the respondents.

(3.) UNDER S. 271(1)(a) of the Act penalty is leviable when there is delay without reasonable cause in filing the return of income required to be filed under S. 139 of the Act. Under S. 271(1)(i)(b) of the Act the penalty leviable is a sum equal to two per cent of the assessed tax for every month during which the default continues. The Explanation defines "assessed tax"to mean tax as reduced by the sum, if any, deducted at source under Chapter XVII-C. Thus, in order that a penalty could be levied under S. 271(1)(a) there has to be an assessed tax, meaning thereby that there should be an assessment under which the assessed tax has been determined. There was an assessed tax of Rs. 15,81,137 when the AO levied the penalty and it is on that amount of assessed tax that the AO had calculated the penalty at the rate of two per cent per month for a period of 16 months. It was in this manner that the AO had arrived at the amount of penalty of Rs. 4,89,952. The assessment order having been set aside by the Tribunal the assessed tax vanishes and there can be no assessed tax unless an assessment is again made in pursuance of the order of the Tribunal. There being no assessed tax, the amount of penalty cannot be determined and, therefore, the penalty levied by the impugned order dt. 10th March, 1988 cannot survive. The aforesaid provisions clearly indicate that a penalty under S. 271(1)(a) of the Act cannot be levied before an assessment has been made and the assessed tax has been determined. The assessment has to be made again the pursuance of the order of the Tribunal and, therefore, if there is any assessed tax in pursuance of that order, an order under S. 271(1)(a) of the Act can be passed thereafter in accordance with law.