Penalty for delayed return upheld for a registered firm under special computation rule treating it as an unregistered firm.

Penalty for delayed filing under section 271(1)(a) of the Income-tax Act was held leviable where section 271(2) applied to a registered firm. The Court distinguished the Supreme Court ruling on compensatory interest for late returns and held it did not control penalty proceedings. Applying its earlier Division Bench decisions, it ruled that in cases governed by section 271(2), the penalty must be computed on the tax payable on the assessed income by treating the assessee as an unregistered firm. The assessee was therefore liable to penalty, and the issue was resolved in favour of the Revenue.

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Issues: Whether penalty under section 271(1)(a) of the Income-tax Act, 1961 was leviable in a case governed by section 271(2) notwithstanding the assessee's contention that there was no "assessed tax" for purposes of the Explanation.

Analysis: The question turned on the interaction between the penalty provision for delayed filing and the special rule in section 271(2) applicable to registered firms. The Court held that the Supreme Court decision dealing with compensatory interest on delayed return did not govern the levy of penalty. Relying on its earlier Division Bench decisions, the Court applied the rule that, for cases covered by section 271(2), penalty is to be computed on the tax payable on the assessed income on the footing that the assessee is an unregistered firm.

Conclusion: The assessee was liable to penalty under section 271(1)(a) read with section 271(2) of the Income-tax Act, 1961, and the question was answered in favour of the Revenue.

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