Pradip Lamps Works vs Commissioner Of Income-Tax

1. There are two appeals before us. In Civil Appeal No. 911 of 1977, two questions were referred under Section 256(1) of the Income-tax Act, 1961, for the opinion of the High Court. The two questions are :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that inasmuch as the assessee did not appear before the original Income-tax Officer in response to the notice asking it to show cause why penalty should not be imposed, and had made no oral submissions but had only made a reply in writing it was in order for the successor Income-tax Officer to have imposed the penalty without giving a fresh notice to the assessee or hearing the assessee ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that notwithstanding that the return of Income had been filed on February 6, 1961, i.e., within the period permissible under Section 139(4) of the Income-tax Act, 1961, the imposition of a penalty was justified as there was a delay for the purpose of Section 271(l)(a) of the Income-tax Act, 1961 ?"

2. Both the questions were answered by the High Court against the assessee and in favour of the Revenue. We see no error in the order of the High Court.

3. So far as the first question is concerned, the only contention of the assessee was that before a penalty order was passed by the successor Income-tax Officer, no personal hearing was given to him. The Act does not make it obligatory upon the successor-Income-tax Officer to give a personal hearing. In this case, the show-cause notice was issued on November 17, 1966. Even though a period of two years elapsed, no explanation or representation was made by the assessee, whereupon the order of penalty was passed on December 23, 1968. Section 129 makes it clear that a successor Income-tax Officer has jurisdiction to continue the proceedings from the stage at which the proceeding was left by his predecessor. The proviso, no doubt empowers the assessee to demand that before the proceeding is so continued, the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, be reheard. But, in this case, it is not suggested that any such demand was made by the assessee. In such circumstances, the High Court was right in answering the question against the assessee.

4. So far as the second question is concerned, the only submission is that since the assessee was entitled to and did file his return before making the assessment, no penalty should be levied under Section 271(l)(a), even though the return was filed beyond the prescribed date. We do not think that this contention is sustainable in law. Merely because, Sub-section (4) of Section 139 enables the assessee to file his return at any time before the assessment is made, it does not mean that his liability to pay penalty under Section 271(l)(a) is erased. We affirm the opinion of the High Court on this question as well.

5. Now, coming to Civil Appeal No. 913 of 1977, the only question referred under Section 256(2) is the following :

"Whether, on the facts and in the circumstances of the case, for the purpose of calculating the tax with reference to which the penalty was leviable in the case of a registered firm under Section 271{l)(a) read with Section 271(2) the tax payable by such firm should be determined after the tax paid by partners in respect of their share of profit from the firm from the gross tax payable by the firm, on the basis that it was unregistered firm ?"

6. A reading of the question would disclose that the only contention of the assessee was that while calculating the tax with reference to which penalty was leviable under Section 271(l)(a), read with Section 271(2). the tax paid by the partners in their individual assessments should be deducted. We see no room for such an argument in the context. Section 271(2) says that when the person liable to penalty is a registered firm, then, notwithstanding anything contained in the other provisions of the Act, the penalty imposable under Section 271, Sub-section (1), shall be the same amount as would be imposable on that firm if that firm were an unregistered firm. The assessee herein was a registered firm. It was assessed as such. So far as the assessment proceedings are concerned, undoubtedly, it will be assessed as a registered firm, but for the purpose of penalty it will be treated as an unregistered firm and penalty has to be calculated on that basis. This is exactly what has been done in this case. In such a situation, there is no occasion of deducting the tax paid by the partners in their individual assessments from out of the tax assessed. It may be remembered that the assessment of tax is only for the purpose of determining the penalty payable, inasmuch as at the relevant time the penalty was two per cent, of the assessed tax subject of course to the prescribed ceiling. In our opinion, the High Court was right in answering the said question also against the assessee and in favour of the Revenue.

7. Both the appeals are accordingly dismissed. No costs.