If advance tax paid is in excess of the tax payable on total income, the assessee is not liable to pay the penalty under Section 271(1)(a) of the Income-tax Act, 1961.

A.R. Tiwari, J.

1. At the instance of the Commissioner of Income-tax, Bhopal, the Income-tax Appellate Tribunal, Indore, has stated the case and referred the undernoted question of law under Section 256(1) of the Income-tax Act, 1961 (for short, "the Act"), for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that no penalty is leviable on a registered firm under Section 271(1)(a) of the Income-tax Act, 1961, treating it as unregistered firm under Section 271(2) of the Act when the advance tax paid is more than the assessed tax on the registered firm ?"

2. The facts lie in a narrow compass.

3. The non-applicant-assessee was assessed in the status of a registered firm. It filed its return of income for the assessment year 1976-77 on August 19, 1977, which was to be filed on June 30, 1976. There was a delay of 13 months. The assessee had applied for extension of time up to October 30, 1976. The prayer was allowed till September 30, 1976. After excluding this period, the Income-tax Officer computed the delay of ten months for the purpose of penalty and levied the penalty of Rs. 8,690 treating the assessee as unregistered firm in view of Section 271(2) of the Act (annexure-A). The assessee appealed before the Commissioner of Income-tax (Appeals) and contended that the tax assessed was Rs. 13,320, whereas advance tax on due date was paid which was Rs. 16,800 and, as such, no penalty was leviable. It was also contended that Section 271(2) of the Act is not applicable. The Commissioner of Income-tax (Appeals), however, confirmed the levy of penalty (annexure-B). The assessee, then filed the appeal before the Tribunal. The Tribunal held that no penalty was leviable where the registered firm paid advance tax more than the assessed tax. The Tribunal, therefore, allowed the appeal and set aside the order of the Income-tax Officer and the Commissioner of Income-tax (Appeals). The applicant then filed an application under Section 256(1) of the Act. The Tribunal referred the aforesaid question.

4. We have heard Shri D.D. Vyas, learned counsel for the applicant. None appeared for the non-applicant.

5. The legal position is not in tenebrosity. In P. Venkata Krishnayya Naidu and Son v. CIT [1984] 150 ITR 545 (AP), the High Court of Andhra Pradesh expressed the view that if advance tax paid is in excess of the tax payable on total income, the assessee is not liable to pay the penalty under Section 271(1)(a) of the Act. In CIT v. Mushara Tad Estate [1981] 130 ITR 955 (Gauhati), the Gauhati High Court took the view that if the tax paid in advance is more than the lax payable, then levy of penalty is not valid. In Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99 (Mad), the High Court of Madras held that if no tax is found payable by the assessee, then there will be no occasion to impose penalty.

6. The penalty was levied by the Income-tax Officer under Section 271(1)(a) of the Act which provided that "in addition to the amount of tax, if any payable by him, the assessee would also pay certain sum as penalty". As no amount of tax was outstanding, there was no question of making a direction for payment of additional sum as penalty. The aforesaid provision now stands omitted by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989. Similarly, the recourse to Section 271(2) of the Act was also not proper and valid.

7. After consideration of the question and the provision of law, we respectfully agree with the view expressed in the aforesaid decisions.

8. In the result, we hold that the Tribunal was correct in its view that no penalty is leviable.

9. Accordingly, we answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue, but without any orders as to costs. Counsel fee for each side, is however, fixed at Rs. 750, if certified.

10. A copy of this order be transmitted to the Tribunal in accordance with the rules.