Belated return penalty fails where advance tax and TDS wipe out assessed tax and no tax remains payable.

Penalty for delay in filing a return is not sustainable where, after giving statutory credit for advance tax and tax deducted at source, the assessed tax is nil and no tax remains payable. The Tribunal treated "assessed tax" as the tax liability after such credits, and on that basis held that the foundation for penalty under section 271(1)(a) disappears when the assessee is entitled to a refund rather than being left with any unpaid tax.

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Issues: Whether penalty for delay in filing the return was leviable where, after giving credit for advance tax and tax deducted at source, the assessed tax was nil and the assessee was entitled to refund.

Analysis: The assessee's return was filed after notice under section 148 of the Income-tax Act, 1961, and penalty was imposed under section 271(1)(a) for failure to furnish the return within the time prescribed by section 139(1). The decisive question was the meaning of "assessed tax" for computing penalty. The Tribunal accepted that assessed tax must be taken after reducing the tax by advance tax paid and tax deducted at source, and that if no tax remains payable, the foundation for penalty under section 271(1)(a) does not survive. On the facts, the assessee had already paid advance tax and suffered tax deduction at source in excess of the tax ultimately payable, resulting in a refund.

Conclusion: Penalty under section 271(1)(a) was not leviable and the addition to tax by way of penalty was deleted in favour of the assessee.

Ratio Decidendi: Penalty for belated return under section 271(1)(a) cannot be sustained where, after statutory credit for advance tax and tax deducted at source, no tax is payable and the assessed tax is nil.

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