COMMISSIONER OF INCOME TAX Vs. LOHIYA TRADING CO

JUDGEMENT

(1.) In these reference cases arising under the Income Tax Act, the Tribunal referred the following questions of law for the opinion of this Court:

(2.) In R.C.No. 4 of 1991, the question is couched in a different language, but in substance, it is the same. The question is as follows:

(3.) The assessee which is a registered firm filed returns of income with a delay of about 10 months for the years 1982-83 and 1983-84. The assessee did not respond to the penalty notice. Hence penalty of Rs.6,420/- in one case and Rs. 6,920/- in another case was levied u/s 271(1) of the Income Tax Act. On appeal, the Assistant Commissioner confirmed the penalty. On further appeal the appellate Tribunal allowed the appeal partly while accepting the additional ground raised by the appellant. The contention was that penalty u/s 271 (1) (a) ought to be calculated by deducting the quantum of the advance-tax payable by the unregistered firm inasmuch as for the purpose of levy of penalty under the said provision, a registered firm is treated as an unregistered firm. It is this view of the Tribunal that is assailed by the Revenue in this reference case. The answer to the question turns on the interpretation of Sec. 271(2) read with Sec. 271 (1) of the I.T. Act. The mode of computation of penalty by the assessing authority was by way of calculating the tax notionally treating the registered firm as unregistered firm. However, in so calculating the tax for the purpose of levy of penalty under Section 271 (1) of the Act, the advance-tax paid by the registered firm (respondent- assessee) was given credit to. The Tribunal has taken the view that not only the advance-tax actually paid by the assessee firm, but also the advance-tax payable in respect of notional tax liability of the unregistered firm should be deducted while calculating the tax. In other words, it is the view of the Tribunal that in view of the non-obstante provision contained in sub-section (1) of Sec. 271, the income shall be notionally treated as the income of the unregistered firm and the advance-tax attributable to such notional income of the unregistered firm should be deducted irrespective of the fact whether such advance-tax was paid or not. The Tribunal having referred to Sec. 271 (2), observed as follows: