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C.I.T. v. M/S Rae Bareli Construction Co, Rae Bareli - INCOME TAX REFERENCE No. 191 of 1992 [2005] RD-AH 986 (6 April 2005)


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Court no.37


Commissioner of Income-tax, Lucknow.   Applicant


M/S Rae Bareli Construction Co, Rae Bareli                                  Respondent.


Hon'ble R. K. Agrawal, J.

Hon'ble Rajes Kumar, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following two questions of law under section 256 (2) of the Income Tax Act, 1961, hereinafter referred to as "the Act" for opinion to this Court.

"1. Whether on the facts and in the circumstances of the case, the Tribunal was, in law, justified in holding that no penalty u/s 271 (1) (a) could be imposed on a registered firm where the tax deducted at source was more than the tax assessed on it as registered firm, even though as un-registered firm it would be liable to tax ?

"2. Whether on the facts and in the circumstances of the case, the Tribunal was in law, justified in cancelling the order of the Appellate Assistant Commissioner?"

The present Reference relates to the Assessment Years 1982-83 in proceeding arising out of penalty imposed under section 271 (1) (a) of the Act.

Briefly stated the facts giving rise to the present Reference are as follows:-

Respondent-assessee is a registered firm, filed a return of income for the Assessment year 1982-82 on 16th May, 1984 whereas the same was due on 31st July, 1982. Proceeding for levy of penalty under section 271 (1) (a) of the Act was initiated and the assessee tried to explain the delay that it had not received the payment certificates from various firms, which were necessary for finalisation of the balance sheet. The explanation was not accepted and the penalty of Rs.2,971/- was imposed while computing the penalty and the respondent-assessee was treated as an unregistered firm  in accordance with the provisions of Section 271 (2) of the Act which order has been affirmed by the First Appellate Authority. However, in appeal, the Tribunal has deleted the penalty on the ground that the tax deducted at source being more than the tax assessed, the quantum of penalty would be nil. The basis taken by the Tribunal was that it was a registered firm.

We have heard Sri Govind Krishna, learned Standing Counsel for the revenue.

In ITR No. 21 of 1992 Commissioner of Income Tax Versus Chaudhary Brothers decided  on 1st April, 2005, it has held that the penalty is exgible even where the tax has been paid or the demand is nil and the said registered firm is to be treated as unregistered firm under the provision of Section 271 (2) of the Act. Following the aforesaid decision, we are of the considered view that the Tribunal was not justified in holding the penalty under section 271 (1) (a) of the Act is exgible on the respondent-assessee where the tax deducted at source was more than the tax assessed of that of a registered firm. We may mention that if the tax deducted at source and the amount of tax deposited by the respondent-assessee inasmuch as more than the tax which would be payable treating the respondent as unregistered firm then in that event as tax paid was more than that what was to be assessed as unregistered firm, the penalty cannot be exgible. This aspect of the matter has not been gone into by the Tribunal and, therefore, by passing the consequential order, Tribunal shall consider this aspect.

We, accordingly, answer both the questions referred to us in the negative i.e. in favour of the revenue and against the assessee. However, there shall be no order as to costs.

Dated. 06.04.2005.



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