Penalty computation for registered firms turns on unregistered-firm footing once liability arises; nil calculation does not eliminate penalty.

Section 271(1) fixes liability and section 271(2) prescribes a special computation rule for registered firms: once penalty is attracted under section 271(1), it must be computed as if the firm were unregistered. A nil figure on computation as a registered firm does not extinguish the penalty liability. The issue was therefore answered against the assessee and in favour of the Revenue.

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Issues: Whether, on a combined reading of section 271(1)(a) and section 271(2) of the Income-tax Act, 1961, a registered firm could avoid penalty because the penalty computed on the basis of registration would be nil.

Analysis: Section 271(1) lays down when penalty may be imposed and how it is to be calculated, while section 271(2) makes a special provision for registered firms. The applicable scheme is that once a firm is found liable to penalty under section 271(1), section 271(2) requires the penalty to be computed on the footing that the firm is unregistered. The fact that computation on the basis of a registered firm may yield a nil figure does not mean that no penalty can be imposed at all.

Conclusion: The question was answered in the negative and in favour of the Revenue.

Ratio Decidendi: Where a registered firm is liable to penalty under section 271(1), section 271(2) mandates computation on the basis of an unregistered firm, and nil computation as a registered firm does not eliminate penalty liability.

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