COMMISSIONER OF INCOME TAX vs. SAYAJI IRON WORKS QUARRY P LTD

ITR/286/1984HC GujaratGJHC24011951198420 December 1999Author: HONOURABLE MR. JUSTICE B.C.PATEL,HONOURABLE MR. JUSTICE K.M.MEHTA4 pages
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What were the facts?

The Commissioner of Income Tax (CIT) referred a question of law to the High Court of Gujarat concerning the computation of penalty for late filing of a return. The assessee, Sayaji Iron Works Quarry Pvt Ltd, initially filed its return for Assessment Year 1975-76 on July 30, 1975, which was not delayed by a full month. Subsequently, the Income Tax Officer (ITO) reopened the assessment under Section 147. A notice was served on the assessee on February 27, 1979, and a revised return was filed on October 10, 1979, resulting in a delay of approximately six months for which no explanation was provided. The CIT (Appeals) confirmed the ITO's order imposing penalty based on the entire assessed tax from the first return. The Income Tax Appellate Tribunal (ITAT) had previously held that the penalty should be computed on the difference between the first assessment and the assessment upon reopening.

What did the High Court hold?

The High Court held that the Tribunal's decision was correct in law. The Court reasoned that Section 271(1)(a) of the Income Tax Act requires the ITO to consider the 'assessed tax' for levying a penalty when a person fails to furnish a return without reasonable cause. The Court agreed with the Tribunal's interpretation that 'assessed tax' for the purpose of penalty computation in a case of reopening should be the difference between the first assessment and the assessment made upon reopening. The penalty is to be calculated at 2% of this assessed tax for every month the default continued. The Court affirmed that the CIT (Appeals) had correctly identified the delay in filing the return in response to the notice under Section 148 and that the penalty should be calculated with reference to the total tax payable, reduced by tax deducted at source and advance tax. The operative direction is that the answer to the reference is in the affirmative, in favour of the assessee and against the Revenue.

What were the issues?

1. Whether the decision of the Tribunal in holding that the penalty for late filing of the return is required to be computed on the basis of the difference in the first assessment and the assessment on reopening is correct in law? (Question of law, turning on Section 271(1)(a) of the Income Tax Act). Assessee's Contentions: The judgment does not record specific contentions made by the assessee. However, the Tribunal's prior decision, which the High Court is considering, held that the penalty computation should be based on the difference in assessed tax between the initial assessment and the assessment upon reopening. Revenue's Contentions: The Revenue, through the CIT, sought a reference to the High Court, indicating disagreement with the Tribunal's view on penalty computation. The CIT (Appeals) had confirmed the ITO's order, which computed the penalty on the basis of the entire assessed tax from the time of the first return.

Which sections of the Income-tax Act were involved?

Section 271(1)(a),Section 147,Section 148,Section 256(1)

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 286 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE B.C.PATEL and

MR.JUSTICE K.M.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

The order continues below.

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