Penalty ceiling for registered firms under section 271(1)(a) was construed in favour of the assessee, rejecting the Revenue's approach.

For penalty under section 271(1)(a), the statutory ceiling for a registered firm was construed in favour of the assessee rather than on the basis urged by the Revenue. The Tribunal followed its earlier Bombay Bench view that the 50 per cent ceiling on assessed tax was not to be computed in the manner suggested by the department and found no reason to depart from that approach. The departmental appeals therefore failed.

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Issues: Whether, for purposes of penalty under section 271(1)(a), the ceiling of 50 per cent of the assessed tax in the case of a registered firm is to be computed with reference to tax payable as a registered firm or as an unregistered firm.

Analysis: The departmental contention was rejected as the cited authorities did not govern the point in issue. The Tribunal noted that its own Bombay Benches had repeatedly taken the view that the ceiling under section 271(1)(a) in the case of a registered firm is not to be computed on the basis suggested by the Revenue. No reason was found to depart from that view, and it was therefore unnecessary to examine the additional interpretative submission advanced for the assessee.

Conclusion: The penalty ceiling was held to be applicable in the manner favourable to the assessee, and the departmental appeals failed.

Ratio Decidendi: For penalty under section 271(1)(a), the statutory ceiling applicable to a registered firm is to be construed in favour of the assessee and not on the basis urged by the Revenue.

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