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C.I.T. v. Ratan Lal Agarwal - INCOME TAX REFERENCE No. 82 of 1994  RD-AH 886 (29 March 2005)
I.T.R. No. 82 of 1994
CIT, Agra v. Shri Ratan Lal Agrawal (HUF), Khansi.
Hon'ble R.K.Agrawal, J.
Hon'ble Prakash Krishna, J.
The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under Section 256(1) 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 Tribunal was correct in law in upholding the decision of first appellate authority in restricting the penalty u/s 271(1)(a) to 50% of the assessed tax instead of 2% of the tax for every month of default committed, irrespective of the fact that the decision of the Hon'ble Supreme Court in the case of Maya Rani Punj is squarely applicable in the assessee's case?"
The Reference relates to the Assessment year 1972-73 in a proceeding arising out of the penalty imposed under Section 271(1)(a) of the Act.
Briefly stated the facts giving rise to the present reference are as follows:
The respondent-assessee was required to file his return of income on or before 31st July, 1972 but he filed the same on 6th January, 1983 for the relevant assessment year 1972-73. The assessment was framed on 30th September, 1986 and a penalty notice under Section 271(1)(a) was also issued for the default committed by him. The return was filed in response to notice under Section 148 of the Act and thus there was a delay of 125 months in filing the return of income. The Assessing Officer, after considering the explanation and taking into account the facts of the case as they stood, imposed penalty of Rs. 91,158/- vide order dated 28th March, 1989. Feeling aggrieved the respondent preferred an appeal before the Deputy Commissioner of Income Tax (Appeals) who has partly allowed the appeal and restricted the penalty to 50% of the assessed tax relying upon the Circular No. 204 dated 26th July, 1976 issued by the Central Board of Director Taxes which order has been upheld by the Tribunal.
We have heard Sri A.N.Mahajan learned standing counsel for the Revenue and Sri S.D.Singh, learned counsel appearing on behalf of the respondent assessee.
The learned standing counsel submitted that as there was a delay of 125 months and the return was filed only on 6th January, 1983 the proceeding regarding imposition of penalty as it stood on the relevant date of filing of the return of income would be applicable and, therefore, the penalty @ 2% of the amount of assessed tax per month would be leviable and the Tribunal was not justified in restricting the amount of penalty to 50% of the assessed tax relying upon the circular issued by the Central Board of Direct Taxes. The submission is misconceived. We find in catena of decision of the Apex Court that the circulars issued by the Central Board of Direct Taxes in exercise of powers under Section 119 of the Act are binding upon the authorities. In this view of the matter the Deputy Commissioner of Income Tax (Appeals) as also the Tribunal was justified in relying upon the said circular and restricting the amount of penalty to 50% of the tax assessed.
We, accordingly answer the question referred to us in the affirmative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
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