1988 (10) TMI 24 - HC - Income Tax

High Court cancels penalty for late tax return filing due to time-barred assessment

The High Court upheld the Tribunal's decision to cancel the penalty imposed on a partnership firm for late filing of its return under section 271(1)(a) of ... Penalty Issues involved: Assessment of penalty u/s 271(1)(a) of the Income-tax Act, 1961 for late filing of return and the validity of penalty imposition.Summary:The case involved the assessment of penalty u/s 271(1)(a) of the Income-tax Act, 1961 on a partnership firm for late filing of its return. The firm, S. P. Viz Construction Co., filed its return for the assessment year 1969-70 after the due date of June 30, 1969. The firm claimed it had applied for an extension of time due to difficulties in finalizing its accounts. The Income-tax Officer initiated penalty proceedings and imposed a penalty of Rs. 48,610, which was upheld by the Appellate Assistant Commissioner.The firm then appealed to the Income-tax Appellate Tribunal, which noted that the assessment for the relevant year had been set aside as time-barred. As a result, no tax was payable by the firm, leading the Tribunal to cancel the penalty order based on the tax payable being a prerequisite for calculating the penalty under section 271(1)(a) of the Act.The High Court upheld the Tribunal's decision, emphasizing that the penalty under section 271(1)(a) cannot be imposed without reference to the tax assessed. Since no tax was payable due to the assessment being time-barred, the penalty could not stand. The Court answered the referred question in favor of the firm, concluding that the Tribunal's decision to cancel the penalty was valid and proper.