The main legal point established in the judgment is that for the purposes of calculating penalty under Section 271 (1) (a) of the Income Tax Act 1961, a registered firm should be treated as an unregistered firm, and the assessed tax should be calculated accordingly.

PRAKASH KRISHNA, J.

( 1 ) THE Income Tax Appellate Tribunal, Allahabad at the instance of the Revenue has referred the following question of law under Section 256 (1) of the Income Tax 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 holding that no penalty could be imposed on a registered firm where the advance-tax paid exceeded the tax assessed on it as a registered firm even though as an unregistered firm the tax payable would be more than the advance-tax?"

( 2 ) THE reference relates to the assessment year 1983-84. The income tax return for the assessment year 1983-84 was due on 31st July, 1983 as the accounting period ended on 31st march, 1983. It was filed on 19th November, 1985 and was late by more than 27 months. The income-tax Officer initiated penalty proceedings under Section 271 (1) (a) of the Act for late filing of the return of income. A written reply was filed to the show cause notice. The penalty was imposed to the tune of Rs. 2,955/- and while calculating the penalty the assessed tax was determined by treating the assessee, which was registered firm, as an unregistered firm as per the provisions of Section 271 (2) of the Act. The penalty order was confirmed in appeal. However, in further appeal, the appellate Tribunal held that the penalty under Section 271 (1) (a) was not leviable as the advance tax paid by the assessee was more than the tax calculated (on the basis of the registered firm) on the assessed income.

( 3 ) HEARD the learned standing counsel for the department. None appeared on behalf of the assessee.

( 4 ) SECTION 271 (1) (a) of the Act provides that the Income-tax Officer in the course of any proceeding under this Act if it is satisfied that any person has failed to furnish 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 failed to furnish it within the time allowed in the manner required by sub section (1) of Section 139 or by such notice as the case may be, may direct that such person shall pay penalty.

( 5 ) SUB section (2) of Section 271 of the Act reads as follows:

" 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 the fact that any thing (SIC) 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. "

( 6 ) THUS, Section 271 (1) (a) envisages imposition of penalty for failure to file the return of total income or delayed filing of return without reasonable cause, and also for failure to file it in the manner and within the time required. The parameter for levy of penalty is the period of delay viz. default in filing the return of total income without reasonable cause. Section 271 (1) (a) (i) (b) of the Act prescribes manner for calculation of the penalty. It says that in addition to the amount of tax, if any, payable by the assessee, a sum equal to 2 per cent of the assessed tax for every month during which default continued to be leviable as penalty. The combined reading of Section 271 (1) (a) with 271 (2) and 271 (1) (a) (i) (b) is that the imposition of penalty is linked with the assessed tax. Explanation attached to Section 271 (1) (a) (i) (b) defines the assessed tax which means tax as reduced by the sum, if any, deducted at. the source or paid in advance.

( 7 ) IN the present case the return was filed with delay by the assessee which was a registered firm. Sub section (2) of Section 271 of the Act provides that for the purposes of calculation of amount of penalty under Section 271 (1) (a) of the Act the assessee shall be deemed to be treated as unregistered firm who worked out the tax assessed. Meaning thereby that so

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