High Court Of Allahabad
CIT vs. Smt. Pushpa Devi Jain
Section 271(1)(b), 271(1)(iii)
Asst. Year 1982-83, 1983-84
R.K. Agrawal & Rajes Kumar, JJ.
IT Ref. No. 35 of 1996
8th April, 2005
Counsel Appeared : Shambhu Chopra, for the Revenue : None, for the Assessee
JUDGMENT
By the court :
The Tribunal, Allahabad, has referred the following question of law under s. 256(1) of the IT 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 legally justified in confirming the decision of the Dy. CIT(A) deleting the penalties of Rs. 9,800 each in the asst. yrs. 1982-83 and 1983-84 imposed under s. 271(1)(b) of the IT Act, 1961 ?”
2. The reference relates to the asst. yrs. 1982-83 and 1983-84 in proceedings arising out of imposition of penalty under s. 271(1)(b) of the IT Act, 1961.
3. Briefly stated, the facts giving rise to the present reference are as follows : The respondent-assessee is an individual. She derived income from share in the hotel. She did not file any return even after issue of notice under s. 148 of the Act which was issued on 15th Sept., 1984. It was served upon her on 14th March, 1984. Another notice was issued to the assessee under s. 142(1) of the Act on 24th Feb., 1989, which was served on 1st March, 1989. In response to the said notice, she did not file any return. The assessment under s. 144 of the Act was completed ex parte on 13th Sept., 1989, on the total income of Rs. 60,000. Penalty proceeding under s. 271(1)(b) of the Act was initiated for both the assessment years and the assessing authority imposed a sum of Rs. 9,800 in each of the two years as penalty. Feeling aggrieved, the respondent-assessee preferred separate appeal before the Dy. CIT(A). The Dy. CIT(A) has allowed the appeal on the ground that the penalty under s. 271(1)(b) of the Act could not be imposed because no return has been filed by the assessee and as per the provisions of s. 271(1)(b) of the Act for computing the penalty to be levied, a return is a must. The order of the Dy. CIT(A) has been upheld by the Tribunal on the ground that prior to 1st April, 1989, i.e., before the amendment of cl. (ii) of sub-s. (1) of s. 271 of the Act, reassessment proceeding cannot be treated as regular assessment. The Tribunal has upheld the order of the Dy. CIT(A).
4. We have heard Sri Shambhu Chopra, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee.
5. Learned standing counsel submitted that in view of the amendment made to sub-s. (8) of s. 139 of the Act by insertion of Expln. 2 by the Taxation Laws (Amendment) Act, w.e.f. 1st April, 1985, even an assessment made for the first time under s. 147 is to be treated as regular assessment. A similar provision has been made in s. 217 of the Act. Relying upon the decision of the apex Court in the case of K. Govindan & Sons vs. CIT (2000) 164 CTR (SC) 490 : (2001) 247 ITR 192 (SC), wherein the apex Court has held that Expln. 2 to s. 139(8) of the Act is clarificatory and applies to all the assessment years. He submitted that the reasons given by the Tribunal for upholding the order of the Dy. CIT(A) are erroneous. According to him even the first assessment made under s. 147 of the Act like the present one is to be treated as regular assessment and therefore, the penalty was rightly levied. The submission is misconceived. Under s. 271(1)(b) of the Act as it stood during the relevant period, penalty was imposable if any person has without reasonable cause failed to comply with a notice under sub-s. (1) of s. 142 or sub-s. (2) of s. 143 or fails to comply with the direction issued under sub-s. (2A) of s. 142. However, under cl. (ii) to sub-s. (1) of s. 271 of the Act, the quantum of penalty has been mentioned as follows : “(ii) in the cases referred to in cl. (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent, but which shall not exceed fifty per cent of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income.”
6. From the reading of the aforesaid cl. (ii), it is seen that the quantum of penalty is to be determined by treating the return filed by such person to have been accepted as the correct income and the quantum of penalty valued at 10 per cent to 50 per cent. In the present case, the respondent has not filed any return of income, the question of treating the income returned by her as the correct income and the quantification of penalty under cl. (ii) does not arise and, therefore, the Dy. CIT(A) rightly set aside the penalty imposed. Reliance placed by learned standing counsel on the decision of the apex Court in the case of K. Govindan & Sons (supra) is misconceived inasmuch as in the present case, the quantum of penalty is not referable to the regular assessment at all. It is well settled that penalty provisions are to be strictly construed and if under the aforesaid provision, there is no levy of penalty or the quantum cannot be ascertained no penalty under law can be imposed.
7. Accordingly, we 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.
[Citation : 280 ITR 500]
