Bombay High Court
Commissioner Of Income-Tax, Bombay ... vs Govindram And Company on 12 March, 1987
Equivalent citations: [1987]168ITR613(BOM)
JUDGMENT Bharucha, J.
1. This is a reference under section 256(1) of the Income-tax Act, 1961, made at the instance of the Revenue. It raises the following question :
"(1) Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 271(2) of the Income-tax Act, 1961, any penalty was leviable against the assessee, firm under section 271(1)(a) of the said Act ?"
We are concerned with the assessment year 1967-68, the previous year for which ended on March 31, 1967. The assessee is a registered firm. Its return was due on or before September 30, 1967. As it was filed late, the Income-tax Officer called upon the assessee to show cause why penalty should not be imposed. The assessee claimed that it was a broker under the National Defence Remittance Scheme and that the transactions thereunder had caused a long delay in the finalisation of its accounts. The explanation of the assessee was rejected by the Income-tax Officer and he imposed a penalty of Rs. 9,000 under section 271(1)(a) of the Income-tax Act, 1961. The appeal filed by the assessee was rejected by the Appellate Assistant Commissioner. The assessee filed a further appeal to the Income-tax Appellate Tribunal. The Tribunal upheld the plea of the assessee that no penalty was exigible under section 271(2) of the said Act.
2. Mr. Jetly, learned counsel for the Revenue, relied upon the judgments of this court in CIT v. Janata Trading Co. [1984] 150 ITR 676 and CIT v. N. G. K. Electrical Industries [1987] 163 ITR 513, in support of the submission that such penalty was exigible.
3. In the former judgment, the questions posed read thus :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of tax on which the computation of penalty leviable against the assessee-firm under section 271(1)(a)(i) read with section 271(2) of the Income-tax Act, 1961, was to be based was not the amount of tax assessed on it as an unregistered firm, but the net amount of tax, if any, payable by it as a registered firm ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that since the tax payable by the assessee-firm as a registered firm was 'nil', no penalty was at all imposable on the said defaulter assessee-firm under section 271(1)(a)(i) of the Income-tax Act, 1961, and that the question of invoking section 271(2) of the said Act for that purpose did not arise and in cancelling the penalty of Rs. 12,935 imposed on the assessee-firm as per the order of the Appellate Assistant Commissioner ?"
4. Relying, principally, upon the judgment of the Calcutta High Court in CIT v. Priya Gopal Bishoyee [1981] 127 ITR 778, the questions were answered in the negative and in favour of the Revenue.
5. In the latter judgment, the question read thus :
"Whether, on the facts and in the circumstances of the case and in view of the combined reading of the provisions of section 271(1)(a) and section 271(2) of the Income-tax Act, 1961, the Tribunal was justified in cancelling the penalty ?"
6. Relying upon the earlier judgment of this court and the afore-mentioned judgment of the Calcutta High Court, the question was answered in the negative and in favour of the Revenue. The judgment recorded that some other High Courts had taken a similar view, while others had taken a different view. The judgment went on to say thus (p. 514 of 163 ITR) :
"We have been taken through the provisions of section 271. The earlier part of sub-section (1) thereof provides as to when a penalty may be levied; the latter part, as to how it must be calculated. Sub-section (2) makes a special provision regarding registered firms. As we see it, sub-section (2) is applicable to a firm found to be liable to penalty under sub-section (1) because it satisfies the requirements of one or the other of clauses (a) to (c) of sub-section (1). Penalty, if imposed on that firm, must then be calculated on the basis that it is an unregistered firm. It does not appear to us to be correct to say that no penalty can be imposed on a registered firm because the penalty as calculated under the provisions of the latter portion of sub-section (1) upon the basis that it is a registered firm would be nil."
It will be seen that the two judgments cover the point involved in this reference.
7. Mr. Patel, learned counsel for the assessee, submitted that the two judgments were erroneous. In his submission, the Calcutta High Court judgment in Priya Gopal Bishoyee's case [1981] 127 ITR 778 had no application. We are unable to agree with either submission.
8. Mr. Patel drew our attention to the contrary view taken in the judgment of Gauhati High Court in CIT v. Maskara Tea Estate [1981] 130 ITR 955. We are, in the first place, bound by the decisions of this court. In the second place, we are, with great respect, unable to agree with the view expressed by the Gauhati High Court, particularly the view that the non obstante clause in section 271(2) drew not override the provisions of section 271(1)(i) of the Income-tax Act, 1961.
9. The paragraph extracted above from this court's judgment in the case of N. G. K. Electrical Industries [1987] 163 ITR 513, sets out, in our view, the correct position.
Accordingly, the question is answered in the affirmative and in favour of the Revenue.
10. No order as to the costs of the reference.