Penalty base must be net tax payable after advance tax credit, not gross assessed tax, under income-tax law.

Penalty under section 271(1) of the Income-tax Act was to be computed on the balance tax actually payable after credit for advance tax, not on the gross tax assessed. The governing distinction was that "tax payable" is not the same as "tax assessed", so once advance tax had been adjusted, only the net amount shown in the demand could form the base for penalty. On that reasoning, the higher computation was held unsustainable and the penalty order was quashed to that extent.

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Issues: Whether penalty under section 271(1) of the Income-tax Act, 1961, had to be computed on the tax assessed or on the balance tax payable after adjustment of advance tax for the assessment year 1966-67.

Analysis: The assessment order had determined the tax liability after giving credit for advance tax already paid, leaving only the balance amount due under the notice of demand. The governing principle applied was that "tax payable" is not identical to "tax assessed", and the penalty had to be worked out on the amount actually payable after such adjustment, not on the gross assessed tax.

Conclusion: The penalty could not be computed on the total tax assessed; it had to be computed on the balance tax payable. The impugned order was unsustainable to that extent and was quashed in favour of the assessee.

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