1992 (4) TMI 22 - HC - Income Tax

Registered firm treated as unregistered for penalty calculation under Income-tax Act

Ram Bilas Purshottam Dass Versus Commissioner Of Income-Tax

Ram Bilas Purshottam Dass Versus Commissioner Of Income-Tax - [1993] 201 ITR 11, 104 CTR 271, 67 TAXMANN 99 Issues:1. Whether a registered firm should be treated as an unregistered firm for the purposes of penalty under section 271(1)(a) of the Income-tax Act, 1961Rs.Comprehensive Analysis:The case involved a registered firm that filed its income tax return after a delay of seven months from the due date. The Income-tax Officer imposed a penalty under section 271(1)(a) of the Act, treating the firm as an unregistered firm. The Commissioner of Income-tax (Appeals) upheld the penalty, but the Income-tax Appellate Tribunal partially allowed the appeal by directing the penalty amount to be determined after deducting the advance tax paid. The Tribunal referred a question to the High Court regarding the treatment of a registered firm as an unregistered firm for penalty calculation.The High Court analyzed the relevant statutory provisions, specifically section 271 of the Act. It noted that the imposition of a penalty is based on the delay in filing the return of total income without reasonable cause. The penalty amount is linked to the assessed tax, which is clarified in the Explanation of the provisions. Section 271(2) introduces a legal fiction for quantifying the penalty for a registered firm, stating that the penalty should be the same as that for an unregistered firm. This legal principle was supported by previous court decisions, including Delux Publishing Co. v. Addl. CIT [1981] 127 ITR 782.In the present case, the High Court found that the penalty imposed on the registered firm, treated as an unregistered firm, was correctly calculated based on the tax payable as if it were unregistered. The Court rejected the argument that the penalty amount was excessive, emphasizing that determining the appropriate penalty within the statutory limit is a factual matter for the income-tax authorities. The Court also noted that the issue of excessive penalty was not raised before the Income-tax Appellate Tribunal, and therefore, could not be considered by the High Court.Ultimately, the High Court answered the question in favor of the Revenue, affirming that a registered firm should be treated as an unregistered firm for penalty calculation purposes. The Revenue was awarded costs, and the alternate contention regarding the quantum of penalty was rejected due to lack of prior consideration by the Tribunal.