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Cit v. M/S Shri Ganpati Oil Industries - INCOME TAX REFERENCE No. 64 of 1999 [2007] RD-AH 9410 (17 May 2007)


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Court No.2

Income Tax Reference No.64 of 1999

The Commissioner of Income Tax, Kanpur

v. M/s Shri Ganpati Oil Industries, Kanpur

Hon'ble R.K.Agrawal, J.

Hon'ble Bharati Sapru, J.

(Delivered by R.K.Agrawal, J.)

The Income Tax Appellate Tribunal has referred the following question of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-

"Whether on the facts and in the circumstances of the case, the I.T.A.T. was justified in directing to restrict the aggregate amount of penalty u/the assessee 271(1)(a) and 271(1)(c) to the extent of twice the amount of tax sought to be evaded calculated on the basis of tax payable by registered firm and not on the basis of tax payable as an unregistered firm as provided u/s 271(2) of the I.T.Act, 1961 ?"

The reference relates to the Assessment Years 1976-77 the Tribunal 1979-80 in respect of the penalty proceedings initiated under Section 271(1)(a) and 271(1)(c) of the Act. .

Briefly stated, the facts giving rise to the present reference are as follow:-

The assessee firm came into existence during the financial year 1972-73. Till 1982-83, it did not file any return of its income. Proceedings under Section 132 of the Act were taken by the Department in respect of the assessee during 1979. Notices were issued under Section 148 in compliance of which returns were filed by them in respect of the assessment years 1973-74 to 1979-80. Assessment for all these years were made in the status of a registered firm on 21.2.1986. Thereafter, penalty proceedings were initiated under Section 271(1)(a), 271(1)(c) and 273(2)(b) and penalties were imposed, which were confirmed in first appeal excepting for the assessment year 1974-75. The Tribunal confirmed the imposition of penalties but sent the files back to the Assessing Officer for re-computation of the amount of penalty in the contest of the provisions of sub-section (2) of Section 271 of the Act, which imposed a ceiling of a total quantum of penalty to be imposed under clause (a) and (c) of sub-section (1) of Section 271 of the Act. While re-computing the penalties for the assessment years 1977-78 and 1978-79 the Assessing Officer granted some relief but made a wrong computation of the tax sought to be evaded by the assessee. The Income Tax Officer failed to re-compute the penalties for the assessment years 1977-78 and 1978-79 on the ground that they were in order and for those two years the same mistake was committed by him. According to the Assessing Officer, the tax sought to be evaded was wrongly calculated treating the firm as unregistered. The assessee moved a petition under Section 154 of the Act before the Assessing Officer seeking correction of this patent mistake but failed. They also lost before the Commissioner of Income Tax (Appeals) who also confirmed the view taken in respect of the assessment years 1977-78 and 1978-79. When the matter was brought by the assessee before the Tribunal, it modified the penalty orders clarifying its order dated 8.3.1991 in the following manner:-

"We have heard the parties at length and we are of the opinion that the argument advanced by the learned counsel for the assessee have force. Section 271(3) is very clear on the point and it provides that notwithstanding anything contained in this section, penalty imposed under clause (i) of sub-section (1) and the penalty imposed under clause (iii) of Section read with Explanation 3 thereof shall not exceed in the aggregate twice the amount of tax sought to be evaded. In view of the express provisions of law, we feel that this aspect has not been considered by the learned C.I.T.(A) or the I.T.O. The law being very clear, the penalty imposed in no case, can exceed twice the amount of tax evaded. We, therefore, send back these four appeals to the I.T.O. with the limited purpose to recompute the amount of penalty according to the provisions of Section 271(3) of the I.T.Act, 1961 and set aside the order passed by the I.T.O. and confirmed by the learned C.I.T.(Appeals) for these four years only. As a result the appeal Nos.277, 278 of 1990 are dismissed and the rest four appeals in I.TA.Nos.279 to 283 of 1990 are restored back to the file of the I.T.O. with a finding that the fact of penalty stands confirmed but they are sent back to the I.T.O. to recompute the amount of penalty to be imposed according to Section 271(3) according to which the total penalty imposed u/s 271(1)(a) and 271(1)(c) will not exceed twice the amount of tax evaded?"

We have heard Sri R.K.Upadhaya, learned Standing Counsel for the Revenue.

We find that the controversy raised herein is squarely covered by a decision of the Apex Court in the case of Pradip Lamp Works v. Commissioner of Income Tax, (2001) 249 ITR 797, wherein the Apex Court has held that in a case of delayed filing of return by a registered firm, to ascertain the quantum of penalty on the basis, it will be treated as unregistered firm.

In view of the aforesaid decision, we answer the question referred to us in favour of the Revenue and against the assessee. There shall be no order as to costs.




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