Penalty for late return fails where advance tax wipes out assessed tax and no penalty base remains.

Penalty for late filing under section 271(1)(a) applies only where assessed tax remains payable after adjusting advance tax and tax deducted at source. If those payments equal or exceed the tax determined on regular assessment, the assessed tax becomes nil and the penalty base disappears, so no penalty can be computed. The fiction in section 271(2) operates only after an actual penalty liability arises on positive assessed tax; it cannot be used to create liability where none exists after such adjustment. The text also distinguishes an earlier case in which assessed tax remained positive. On the stated facts, no penalty was leviable on the registered firm.

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Issues: Whether a registered firm can be subjected to penalty for late filing of return under section 271(1)(a) of the Income-tax Act, 1961, where the advance tax paid equals or exceeds the tax found payable on regular assessment, and whether the fiction under section 271(2) can be invoked in such a situation.

Analysis: The relevant provision makes penalty for delayed return a percentage of the assessed tax, and the explanation reduces assessed tax by tax deducted at source and advance tax paid. Where such payments exhaust or exceed the tax determined on regular assessment, the assessed tax becomes nil. On that construction, the penalty base disappears and no penalty can be computed. The fiction under section 271(2) is applicable only after there is actual assessed tax giving rise to penalty liability; it cannot create a liability where none exists after adjustment of advance tax. The decision also distinguishes the earlier case where assessed tax remained positive after adjustment.

Conclusion: No penalty is leviable on the registered firm for delayed filing of return in the facts found, and the question was answered in the affirmative, in favour of the assessee.

Final Conclusion: The reference was resolved by holding that overpayment of advance tax resulting in no assessed tax bars levy of penalty for late filing under the relevant provision.

Ratio Decidendi: For a registered firm, penalty for delayed return under section 271(1)(a) can be levied only when assessed tax remains payable after adjustment of advance tax and tax deducted at source; if the assessed tax is nil, section 271(2) cannot be used to impose penalty.

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