High Court Of Allahabad
CIT vs. Raja Sharda Narain Singh
Section 271(1)(a)
Asst. Year 1948-49
R.K. Agrawal & K.N. Ojha, JJ.
IT Ref. No. 309 of 1980
27th July, 2004
Counsel Appeared :
A.N. Mahajan, for the Revenue : None appeared, for the Assessee
JUDGMENT
By the court :
The Tribunal has referred the following two questions of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”), for the opinion of this Court :
“(i) Whether, on the facts and in the circumstances of the case, the Tribunal was in law competent to reduce the penalty under s. 271(1)(a) to a figure lower than the sum equal to two per cent of the tax for every month during which the default continued but not exceeding in the aggregate 50 per cent of the tax ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was competent to reduce the quantum of penalty below the minimum prescribed in s. 271(1)(a) of the IT Act, 1961 ?”
Briefly stated, the facts giving rise to the present reference are as follows :
The respondent-assessee is an individual and the matter pertains to the asst. yr. 1948-49, accounting year ending in September, 1947. By a notice under s. 148 of the Act, the respondentassessee was required to file his return for the year under reference on or before 5th May, 1973. However, it was filed on 20th Sept., 1974. The ITO initiated proceedings under s. 274 r/w s. 271 (1)(a) of the Act and issued a notice to show cause as to why penalty should not be imposed for the late submission of the return. The respondent-assessee in his reply submitted that the default was technical as it was pointed out that the same income be assessed which was originally assessed for the asst. yr. 1948-49. The ITO being dissatisfied with the explanation, imposed a penalty of Rs. 51,148 under s. 271(1)(a) of the Act vide his order dt. 26th March, 1977. In appeal, the AAC confirmed the penalty imposed on the respondent-assessee. The respondent-assessee feeling aggrieved preferred an appeal before the Tribunal. The Tribunal though found that there was no infirmity in the order as the respondent-assessee had failed to show any reasonable cause for not filing the return in time, yet reduced the penalty to Rs. 2,000 as a token penalty, to meet the ends of justice.
We have heard Sri A.N. Mahajan, learned standing counsel appearing for the Revenue. Nobody has put in appearance on behalf of the respondent-assessee. Sri Mahajan submitted that the law fixes the minimum and maximum penalty which is to be imposed in a given set of circumstances and it is not open to the authorities constituted under the Act to impose penalty of an amount which is less than the minimum prescribed under the Act. He relied upon a Division Bench decision of this Court in the case of CIT vs. Ram Murti (1973) 87 ITR 577 (All); a Division Bench decision of the Delhi High Court in the case of CIT vs. Maya Rani Punj (1973) 92 ITR 394 (Del); a decision of the Hon’ble Supreme Court in the case of Smt. Maya Rani Punj vs. CIT (1986) 50 CTR (SC) 191 : (1986) 157 ITR 330 (SC); and a Division Bench decision of the Hon’ble Madras High Court in the case of CIT vs. J. Stead & Co. (P) Ltd. (1998) 234 ITR 730 (Mad).
In the case of Ram Murti (supra), this Court has held as follows : “Where the ITO considers it to be a case attracting penalty, he must follow the terms of that provision as to the quantum of penalty. The provision requires that the quantum should be two per cent of the tax for every month during which the default continued but not exceeding in the aggregate 50 per cent of the tax. The rate at which the penalty must be computed is clearly laid down. To our mind, it is not variable. If that is so for the ITO, then equally it is so for the Tribunal. If Parliament had at all intended to vest a power in the Tribunal to reduce or waive the penalty it would have clearly and expressly done so. It has done so in the case of the CIT by enacting s. 271 (4A).”
7. After referring to a decision of the Calcutta High Court in the case of CIT vs. A.K. Das (1970) 77 ITR 31 (Cal), this Court has held that while disposing of an appeal against a penalty order made under s. 271(1)(a) of the Act, the Tribunal must determine the quantum of penalty applying the rate of two per cent so however that the quantum does not exceed 50 per cent of the tax.
8. In the case of Maya Rani Punj (supra), the Hon’ble Delhi High Court has held that the Tribunal is not competent to reduce the penalty levied under s. 271(1)(a) of the Act to a figure lower than the sum equal to two per cent of the tax for every month during which the default acontinued but not exceeding in the aggregate 50 per cent of the tax.
9. The decision of the Hon’ble Delhi High Court in the case of Maya Rani Punj (supra) has been affirmed by the Hon’ble Supreme Court in the case of Maya Rani Punj (supra).
10. The Hon’ble Madras High Court in the case of J. Stead & Co. (P) Ltd. (supra), has followed the decision of the Hon’ble Supreme Court and following the decision of the Hon’ble Supreme Court in the case of Maya Rani Punj (supra) has held as under : “The use of the expression ‘equal to two per cent’ found in s. 271(1)(a) clearly gives an indication that it should not be anything less or more than what is prescribed. The section mandates that once the authority has come to the conclusion that penalty is leviable under the provisions of s. 271(1)(a), the authority exercising his powers under the Act, is bound to impose the penalty that is prescribed by the statute. The Tribunal is an authority functioning under the provisions of the IT Act and after the Tribunal has recorded a finding that penalty is attracted, it has no jurisdiction to reduce the amount of penalty than the one prescribed under that section. The question whether the authorities functioning under the Act can reduce the quantum of penalty below the one prescribed by the statute, was the subject-matter of consideration in several decisions by various High Courts and the uniform view of all the High Courts is that when the section prescribes the penalty at a particular rate, the same cannot be anything less or above the one prescribed thereunder. The Supreme Court in Smt. Maya Rani Punj vs. CIT (1986) 50 CTR (SC) 191 : (1986) 157 ITR 330 (SC), also has taken the view that it is not open to the Tribunal to reduce the penalty imposed under s. 271(1)(a) of the Act to anything lower than the sum equal to two per cent of the tax assessed for every month during which the default continued.”
11. We are in respectful agreement with the decisions, referred to above, and hold that the Tribunal was not justified in reducing the penalty below the minimum prescribed under s. 271(1) (a) of the Act.
12. In view of the foregoing discussions, we answer both the questions of law in the negative, i.e., in favour of the Revenue and against the respondent-assessee. Since nobody has appeared on behalf of the respondent-assessee, there shall be no order as to costs.
[Citation : 272 ITR 374]
