Pathak, C.J:— By a common judgment the Income-tax Appellate Tribunal, Gauhati Bench, hereinafter referred to as “the Tribunal”, disposed of I.T As. Nos. 111 (Gauhati) and 112 (Gauhati) of 1971-72, relating to penalties in assessment years 1963-64 and 1964-65. There were two reference petitions and the Tribunal has referred the following common question of law to the High Court under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as “the Act”:

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the order of the Appellate Assistant Commissioner cancelling the penalty orders of the Income-tax Officer under section 271(1)(a) of the Income-tax Act, 1961, relating to the assessment years 1963-64 and 1964-65, on the ground that the penalty orders were illegal and not according to law?”

2. The facts of the case may be briefly stated as follows: In the assessment year 1963-64, the Income-tax Officer found that the assessee's accounting year ended on September 30, 1962, and, therefore, it was required to submit the return of income on or before June 30, 1963. But the assessee submitted the return on October 3, 1964, and thus there was a delay of 15 months in the submission of the return for the assessment year 1963-64. The Income-tax Officer, therefore, initiated the penalty proceedings under section 271(1)(a) of the Act and imposed a penalty of Rs. 6,944. In the assessment year 1964-65, the Income-tax Officer found that the accounting period of the assessee ended on September 30, 1963, and, therefore, the assessee was required to submit the return of income on or before June 30, 1964. But the return was filed on June 9, 1966, and thus there was a delay of 23 months in the submission of the return. The Income-tax Officer, therefore, initiated penalty proceedings under section 271(1)(a) of the Act and in this year the assessee pleaded that the default was due to the assesses, haying a large number of branches and lack of active assistance of the accountant. The assessee also pleaded that as interest under section 139 of the Income-tax Act was charged, no penalty under section 271(1)(a) of the Act was imposable. The Income-tax Officer did not accept the submissions made on behalf of the assessee and imposed a penalty of Rs. 70,118 under section 271(1)(a) of the Act for the assessment year 1964-65.

3. The two penalty orders were appealed against before the Appellate Assistant Commissioner who by a consolidated order allowed both the appeals and cancelled the two orders of penalty passed by the Income-tax Officer.

4. The department being aggrieved by the order of the Appellate Assis tant Commissioner, preferred two appeals before the Tribunal. On the reasonings given in its common order, the Tribunal upheld the order of the Appellate Assistant Commissioner setting aside the impugned orders of penalty passed by the Income-tax Officer. Thereafter, on the application of the Commissioner of Income-tax under section 256(1) of the Act, the above common question of law has been referred.

5. From the order of the Appellate Assistant Commissioner the Tribunal found as correct that for the assessment year 1963-64, the assessee was assessed on a total income of Rs. 2,89,620. The tax calculated on the income of Rs. 2,89,620 in the status of an unregistered firm would be Rs. 2,19,035 and at the rate of 2 per cent. per month on this amount, the penalty assessable was Rs. 4,380 and the delay in submission of the return being for a period of 15 months, the penalty imposable for the assessment year 1963-64 should have been Rs. 65,700. But the Income-tax Officer had imposed a penalty of Rs. 6,944 only. Having perused the calculation sheet kept in the file of the assessment proceeding the Tribunal found that the Income-tax Officer calculated the tax at Rs. 33,605 as a registered firm and he deducted advance tax paid under section 210 at Rs. 10,460 and thus the balance tax was Rs. 23,145 and on this tax he had calculated the penalty for 15 months at 30% and thus calculated the penalty amount of Rs. 6,944.

6. In its appellate order the Tribunal observed that under section 271(2) of the Act, in the case of a registered firm the penalty imposable has to be calculated as if the firm were an unregistered firm and that the Income-tax Officer committed mistake by calculating the penalty on the basis of the tax payable as a registered firm and, therefore, the penalty order could not be said to be according to law. The Tribunal also came to the conclusion that for the assessment year 1963-64, the imposable penalty under the law was Rs. 65,700. The Tribunal further observed that it had no right to enhance the penalty amount. The Tribunal, therefore, held that the penalty imposed by the Income-tax Officer for the assessment year 1963-64 was not in accordance with law and since the Tribunal had no right to enhance the penalty, there was no other alternative but to set aside the order of penalty imposed by the Income-tax Officer and in that view the Tribunal upheld the order of the Appellate Assistant Commissioner.

7. For the assessment year 1964-65, the Tribunal found that the assessee was assessed on a total income of Rs. 2,81,110. Relying on the reasonings of the Appellate Assistant Commissioner, the Tribunal observed that the tax on the total income of Rs. 2,81,110 in the status of an unregistered firm came to Rs. 2,03,405 and the penalty at the rate of 2 per cent. of this amount came to Rs. 4,068 per month. The delay in submission of the return was for a period of 23 months and, therefore, the penalty imposable in the assessment year 1964-65 was Rs. 93,564. But the Income-tax Officer imposed a penalty of Rs. 70,118 only. In its appellate order the Tribunal observed that having scrutinised the calculation chart of the Income-tax Officer it was found that the Income-tax Officer calculated the tax at Rs. 1,52,430 on a total income of Rs. 2,81,110 and on this amount he had calculated the penalty at 2% for the default of 23 months and had thus calculated the penalty amount at Rs. 70,118 only. The Tribunal then observed that in the assessment year 1964-65, the penalty imposable should have been Rs. 93,564 but the Income-tax Officer imposed penalty of Rs. 70,118, which was not according to law and since the Tribunal could not enhance the amount of penalty it had no other alternative but to declare that the penalty imposed by the Income-tax Officer was not in accordance with the law and accordingly the order of penalty passed by the Income-tax Officer had to be set aside, upholding the order of the Appellate Assistant Commissioner cancelling the order of penalty passed by the Income-tax Officer.

8. It may be observed that the Tribunal did not enter into the question of reasonableness of the cause of default as shown by the assessee for the assessment year 1964-65.

9. Relevant provisions of section 271 of the Act read as follows:

“271. Failure to furnish returns, comply with notices, concealment of income, etc.—(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person—

(a) has without reasonable cause failed to furnish the 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 without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or…….

he may direct that such person shall pay by way of penalty,—

(i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax;……

Explanation.—……

(2) When the person liable to penalty is a registered firm or an un registered firm which has been assessed under clause (b) of section 183, then, notwithstanding anything contained 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…….”

10. From the above provisions it is found that if the default, as contemplated under clause (a) of sub-section (1) of section 271, is committed by a registered firm and such a registered firm is found liable to penalty under sub-section (1) then the quantum of penalty would be the same as would be imposable on that firm as if it were an unregistered firm. In the instant case, the assessee was assessed in the status of a registered firm for both the assessment years 1963-64 and 1964-65. The Income-tax Officer found that there was default in the submission of the return as required by law. So, penalty proceedings were initiated under section 271(1) of the Act. For the assessment year 1963-64 it was found that there was delay of 15 months and for the assessment year 1964-65 there was delay of 23 months in the submission of the return. The assessee was, therefore, liable to pay penalty under section 271(1) of the Act. The penalty must be imposed within the minimum and maximum limits prescribed by section 271(1)(a)(i) read with sub-section (2) of section 271. Sub-section (2) cannot be detached from subsection (1) of section 271 while determining the quantum of penalty between the minimum and maximum limits prescribed. The statutory minimum and maximum limits of penalty imposable under section 271 have to be observed by any authority imposing the penalty. In the instant case, the penalty was imposed contrary to the provisions of sub-section (2) of section 271. That being so, the order of the Income-tax Officer cannot be said to be in accordance with law and, therefore, it is not sustainable in law. The penalty imposable in both the assessment years was much higher than the penalty imposed by the Income-tax Officer.

11. It is not disputed before us that the Tribunal has no right to enhance the penalty. The question of law referred to us is also not to the effect whether the Tribunal was justified in not remanding the case to the Appellate Assistant Commissioner after setting aside the orders of the Income-tax Officer by upholding the order of the Appellate Assistant Commissioner cancelling the orders of penalty passed by the Income-tax Officer. The common question of law referred to us is whether the Tribunal was justified in law in upholding the order of the Appellate Assistant Commissioner cancelling the penalty orders of the Income-tax Officer on the ground that the penalty orders were illegal and not according to law. There is no doubt, as discussed hereinabove, that the penalty orders passed by the Income-tax Officer were not in accordance with law and on that ground the penalty orders were not sustainable and the Appellate Assistant Commissioner, apart from other grounds, set aside the penalty orders on that ground also. That being so and in view of the facts and circumstances of the case, the Tribunal cannot be said to be unjustified in upholding the order of the Appellate Assistant Commissioner in setting aside the orders of the Income-tax Officer on the ground that the penalty orders passed by the Income-tax Officer were illegal and not according to law. In the result, the question of law referred is answered in the affirmative and against the department. There will be no order as to costs.

Baharul Islam, J.:— I agree.