ORDER
Manzoor Ahmed Bakshi, Judicial Member
1. This is an appeal by the assessee against imposition of penalty Under Section 271(1) (a) of Rs. 1,570 which has been confirmed by the AAC Gwalior Range, Gwalior. Written submissions have been filed on behalf of the assessee. Shri Beck Stephan appeared for the revenue.
2. The appellant is a firm carrying on cloth business at Subopurkalan. The return of income for the asst. year 1982-83 was due to be filed by 30th of June, 1982 but the same has been filed on 23rd of September, 1983 resulting in a delay of 14 months. The reason for the delay in filing of the return given by the assessee before the authorities below was that the return along with the other papers had been handed over to the counsel who was to file the return with the ITO at Shivpuri. The counsel who was residing at Gwalior misplaced the return along with papers handed over to him. Therefore, the assessee contended that the delay was for a reasonable cause and that there was no conscious default by the assessee.
3. It has further been contended in the written submissions before us that the tax paid in advance was more than the assessed tax, and accordingly penalty Under Section 271(1)(a) could not be imposed in this case.
4. On the other hand, learned DR Shri Beck Stephan contended that there is a delay of 14 months, penalty Under Section 271(1)(a) in the absence of a satisfactory explanation from the assessee deserves to be confirmed.
5. We have given our thoughtful consideration to the issues involved in this appeal. The Id. counsel for the assessee has filed copy of the assessment order in the case of the firm by virtue of which income of the assessee had been assessed at Rs. 52,450. The AAC reduced the income of the assessee by Rs. 17,457 and consequently, the income of the assessee has been determined at Rs. 34,990 on which tax payable works out to Rs. 1,594. The assessee had paid advance tax of Rs. 1,620. Evidently, the tax paid in advance is more than the tax finally determined. At the outset we would like to deal with the contention of the assessee that Section 271(1) (a) is not applicable in a case where the assessed tax is either nil or where a refund is due on the basis of advance tax paid and tax deducted at source. This issue has been considered by various High Courts and divergent view has been taken. Gauhati High Court in the case CIT v. Maskara Tea Estate [1981] 130 ITR 955 as also in the case of CIT v. Ganesh Das Sreeram (Firm) [1983] 141 ITR 946 has taken the view that penalty cannot be imposed in the case of a registered firm where the assessed tax as reduced by the tax paid in advance and/or tax deducted at source does not result in a positive figure. In the case of P. Venkata Krishnayya Naidu & Son v. CIT [1984] 150 ITR 545/19 Taxman 369 the Andhra Pradesh High Court has also taken a similar view. The Madras High court in the cases of CIT v. Fomra Bros. [1980] 122 ITR 312 and Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99 has also taken a view favourable to the assessee. However Patna, Madhya Pradesh, Bombay, Calcutta and Gujarat High Courts in the following cases have taken a contrary view: –
1.Jamunadas Mannalal v. CIT [1985] 152 ITR 261/20 Taxman 437 (Pat.)(FB)
2. Jamunadas Mannlal v. CIT [1987] 164 ITR 66 (Pat.)
3. Delux Publishing Co. v. Addl. CIT [1981] 127 ITR 782 (MP)
4. CIT v. Priya Gopal Bishoyee [1981] 127 ITR 778 (Cal.)
5. CIT v. R. Ochhavlal & Co. [1976] 105 ITR 518 (Guj.)
6. CIT v. India Automobiles [1983] 143 ITR 774 (Bom.).
In the meantime, the Hon’ble Supreme Court in the case of Ganesh Das Sreeram v. ITO [1988] 169 ITR 221 had the occasion to consider similar provisions for levy of interest Under Section 139. The Hon’ble Supreme Court held that where the assessed tax is covered by the tax deducted at source or paid in advance, interest Under Section 139(8) could not be charged in the case of a registered firm, which is to be treated as unregistered firm for calculation of interest payable Under Section 139(8).
6. On comparison of Section 139(8) and Section 271 let us find out if there is any material difference in these provisions and test the applicability of the judgment of the Hon’ble Supreme Court in the case of Ganesh Das Sreeram (supra):
Section 139(8) (a)
Where the return under Sub-section (1) or Sub-section (2) or Sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then (whether or not the Income-tax Officer has extended the date for furnishing the return under Sub-section (1) or Sub-section (2), the asses-see shall be liable to pay simple interest at twelve per cent per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return or, where no return has been furnished, the date of completion of the assessment under Section 144, on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted source.
Explanation 2:
For the purposes of this sub-section, where the assessee is a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, the tax payable on the total income shall be the amount of tax which would have been payable if the firm had been assessed as an unregistered firm.
Section 271(a):
Failure to furnish returns, comply with notices, concealment of income, etc. – (1) If the Income-tax Officer or the Appellate Assistant Commissioner (or the Commissioner) (Appeals) in the course of any proceedings under this Act, is satisfied that any person
(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice as the case may be, or
(b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent of the assessed tax for every month during which the default continued.
Explanation:
In this clause “assessed tax” means tax as reduced by the sum, if any, deducted at source under Chapter XVH-B or paid in advance under Chapter XVII-C;
(2) When the person liable to penalty is a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, then, notwithstanding anything contained in the other provisions of this Act, the penalty imposable under Sub-section (1) shall be the same amount as would be imposable on that firm if that firm were an unregistered firm.
Under Section 139(8) interest is chargeable in the following circumstances:
(i) Return is either filed late/or not filed at all; and
(ii) Tax paid in advance or deducted at source is less than the tax determined on assessment.
If assessee is a registered firm, Explanation 2 to Section 139(8) provides that tax payable on the total income shall be the amount which would have been payable if the firm had been assessed as an unregistered firm.
Under Section 271(1)(a) penalty is imposable in the following circumstances:
(i) Return is either filed late or not filed at all; and
(ii) Tax paid in advance or deducted at source is less than the tax determined on assessment.
Sub-section (2) of Section 271 provides that where the person liable to penalty is a registered firm penalty imposable on the firm would be on that firm if it was an unregistered firm.
7. Thus it is evident that there is no material difference in Section 139(8) and Section 271(1)(a) except that interest Under Section 139(8) is chargeable where there is a default whereas Under Section 271(1)(a) it is open to the assessee to show reasonable cause for the delay and if the authorities are satisfied about the reasonable cause penalty would not be attracted.
8. In this background, we are of the firm view that the principle laid down by their Lordships of the Supreme Court in Ganesh Das Sreeram’s case (supra) that where the tax determined on assessment is less or equal to the tax paid in advance there is no question of levy of interest and the firm will not be treated as URF in that case applies to levy of penalty Under Section 271(1)(a).
9. Section 271(2) does not override the provisions of Section 271(1)(a)(0- A person committing a default under Clause (a) of Section 271(1) being a registered firm does not fall automatically under Sub-section (2) of Section 271. Section 271(1) does not exclude registered firms but incorporate all persons, one cannot skip over the relevant Clause (1) and jump to Section 271(2) to stamp the registered firm with liability of penalty. Since in this case the tax paid in advance exceeded the tax finally determined in the status of registered firm, Section 271(2) was not applicable and the tax was not to be determined in the status of unregistered firm. Section 271(2) would come into operation only if penalty Under Section 271(1)(a) read as a whole was imposable.
10. The Hon’ble High Court of Rajasthan in the case of CIT v. Builders Engineers Co. [1989] 175 ITR 317/40 Taxman 443 have considered the provisions of Section 271(1)(a) read with Sub-section (2) of Section 271 in the light of the decision of the Hon’ble Supreme Court in the case of Ganesh Das Sreeram (supra). The different view taken by various High Courts has also been taken into account. The Hon’ble High Court has held that in the case of registered firms where the assessed tax is covered by the tax deducted at source or tax paid in advance penalty Under Section 271(1)(a) cannot be imposed and a firm cannot be treated as unregistered firm for purposes of levy of penalty Under Section 271(1)(a). We accordingly delete the penalty imposed Under Section 271(1)(a) by the ITO and confirmed by the AAC.
11. Even on merits the assessee has a case. The explanation of the assessee that the delay had occurred due to misplacing of papers by the counsel coupled with the fact that the assessee had paid tax in advance and would not have been benefited by deferring a return should have been considered as reasonable for deleting the penalty. In this case preponderance of probabilities are in favour of the assessee. The AAC has given instances for the asst. years 1981-82 to 1984-85 to establish that the assessee is a habitual defaulter: –
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Asst. year Due date of filing Date of filing of
return return
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1981-82 30-5-81 10-7-81
1983-84 30-6-83 23-9-83
1984-85 30-6-84 28-7-84
1985-86 30-6-85 30-7-85
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From the details as above, it is evident that there has not been a considerable delay in filing of these returns. For the asst. years 1981-82,1984-85 and 1985-86 there has been a delay of less than a month. For the asst. year 1983-84, the delay is for 2 months and odd and we do not know whether any penalty has been imposed for that period or whether the assessee had explained the delay in filing of the return. The details relied upon by the AAC would not in our view establish that the assessee was a habitual defaulter. Considering the facts and circumstances of the case, the penalty imposed Under Section 271(1)(a) is cancelled on both counts. Appeal allowed.