Imposition of penalty under section 271(1)(a)(i): court construes "the tax" as demand notice amount after deducting provisional payments; appeal dismissed.

Interpretation of penalty under section 271(1)(a)(i) focuses on whether tax paid under provisional assessment should reduce the tax base for penalty computation. The court applies ordinary textual construction, holding that "the amount of the tax payable" means the tax shown in a demand notice after deducting tax already paid; "the tax" in the latter phrase refers back to that demand amount. Where language is ambiguous, the construction favourable to the assessee applies. The legal effect is that tax paid under provisional assessment reduces the tax on which the penalty is computed; appeal dismissed with costs.

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Issues: Whether, for the purpose of computing penalty under section 271(1)(a)(i) of the Income-tax Act, 1961, the phrase "the tax" refers to the tax assessed under section 143 or to the tax payable after taking into account amounts already paid (i.e., tax payable under a demand notice under section 156), including amounts paid under a provisional assessment under the 1922 Act.

Analysis: The expression in the first part of section 271(1)(a)(i) refers to "the amount of the tax, if any, payable by him", which denotes the tax payable as quantified by a demand notice. The later reference to "the tax" in the same provision is a definite reference to the earlier phrase and therefore should be read as referring to the tax payable after deducting amounts already paid. The provision admits more than one reasonable construction; where a penal or taxing provision is ambiguous, the construction favouring the assessee must be adopted. Precedents of Calcutta and Mysore High Courts support reading "the tax" as tax payable post adjustments such as provisional payments.

Conclusion: The phrase "the tax" in section 271(1)(a)(i) refers to the tax payable under a demand (section 156) after deducting amounts already paid (including provisional assessment payments); accordingly the penalty must be computed on the tax payable after such deductions. The appeal is dismissed in favour of the assessee.

Ratio Decidendi: Where section 271(1)(a)(i) is ambiguous, "the tax" must be construed to mean the tax payable under demand (section 156) after crediting amounts already paid; ambiguities in penal taxation provisions are resolved in favour of the assessee.

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