S.P Goyal, J.:— The assessee, a partnership firm, was served with a notice under s. 22(2) of the Indian I.T Act, 1922 (for short, called “the Act”), requiring it to file its return for the assessment year 1961-62 by June 23, 1961. However, the return was furnished on June 13, 1962, that is, about 11 months after the due date. The ITO, consequently, initiated penalty proceedings and called upon the assessee to furnish its explanation. The contention put forward by the assessee was that the firm as well as its partners had paid not only the advance tax under s. 18A of the Act but also the tax that fell due on completion of the provisional assessment under s. 23B of the Act and as such no penalty was exigible. Their contention was overruled and holding that the assessee has failed to show any reasonable cause for the delay in filing the return, the ITO imposed a penalty of Rs. 63,602 under s. 271(1)(i) of the prevalent I.T Act, 1961. As the AAC gave only a nominal relief of Rs. 6,358 by way of reduction in the penalty amount, the assessee went in further appeal before the Income-tax Appellate Tribunal. Though a finding was recorded by the authorities below that the assessee has failed to show any reasonable cause for the delayed filing of the return, the Tribunal allowed the appeal observing that the payment of tax by the partners on their share of income is a relevant consideration to determine the question of levying penalty under s. 271(1)(a) and in these circumstances there was no contumacious or deliberate disregard of its statutory obligations on the part of the assessee. Aggrieved thereby, the Revenue got the following two questions referred to this court:
“(1) Whether, on the facts of the case, the Tribunal was right, in law, in holding that the penalty leviable under section 271(1)(i),; Income-tax Act, 1961, had to be worked out with reference to the tax that remained payable by the assessee after being allowed credit for the tax paid under section 23B of the Indian Income-tax Act, 1922?
(2) Whether, on the facts and in the circumstances of the case, while holding that the assessee-firm had no reasonable cause for not filing the return in time, the Appellate Tribunal Was right, in law, in holding that penalty under section 271(1)(a), Income-tax Act, 1961, was not exigible?”
2. This case previously came up for hearing before a Division Bench on February 16, 1981, and one of the contentions raised by the assessee under question No. 2 was that the doctrine of mens rea was equally applicable to the penalty proceedings under s. 271(1)(a) of the Act.
3. As there was a lot of conflict on this matter amongst the various High Courts, the Full Bench by its judgment dated July 28, 1981 [CIT v. Patram Dass Raja Ram Beri, [1981] 132 ITR 671 (P & H)], has rendered the answer in the negative holding that the doctrine of mens rea is not attracted to the penalty proceedings under s. 271(1)(a) of the Act. With the decision of the Full Bench, the main contention of the assessee under question No. 2 stands answered against it.
4. So far as the first question is concerned, the learned counsel for the parties are agreed that it stands concluded by a decision of this court in Commissioner Of Income-Tax, Patiala-I v. Mangat Ram Kuthiala, [1978] 111 ITR 823, wherein it was held that as a result of the amendment of s. 271(1)(a)(i), the expression now used is “assessed tax” and not “tax payable” and as this amendment has been made retrospective, it has to be deemed to be always in force. Therefore, while determining the tax assessed, the amount paid under s. 23B could not be adjusted. Question No. 1 is, accordingly, answered in the negative, that is, in favour of the Revenue and against the assessee.
5. Once under question No. 1 it is held that the payment of the tax under s. 23B could not be deducted while determining the tax assessed for purposes of s. 271(1)(a)(i), the finding of the Tribunal that the assessee had paid whole of the assessed tax and as such no penalty was exigible has to be reversed. The tax payable by the assessee as registered firm has been worked out at Rs. 28,631.38 out of which Rs. 3,394 were liable to be deducted on account of the payment of advance tax and Rs. 5,323 as tax deducted at source. Thus calculated, the assessed tax would come to Rs. 19,914.38 and with reference to this amount, the penalty would be imposable. However, the assessee being a registered firm the amount of the assessed tax has to be calculated in accordance with the provisions of sub-s. (2) of s. 271 of the Act, that is, by taking the assessee as an unregistered firm. But the learned counsel for the respondent relying on CIT v. Maskara Tea Estate, [1981] 130 ITR 955 (Gauhati), contended that as no tax was payable by the assessee, it was not liable to penalty. A similar view was taken by the Madras High Court in Addl. CIT v. Murugan Timber Depot, [1978] 113 ITR 99, but a contrary view was taken by the Gujarat High Court in the CIT v. R. Ochhavalal & Co., [1976] 105 ITR 518. However, it is not necessary for us to express our considered opinion on this matter because in the case of Murugan Timber Depot, [1978] 113 ITR 99 (Mad), the amount of the assessed tax worked out according to the Explanation to s. 271(1)(i)(b) happened to be nil. The amount of the penalty in this case, therefore, could not be worked out unless the provisions of sub-s. (2) of s. 271 were invoked to calculate the assessed tax. The Gauhati and Madras High Courts held that if no penalty could be imposed because of the assessed tax being nil, the assessee was not liable to penalty within the meaning of sub-s. (2) of s. 271. On the other hand, the Gujarat High Court held that the moment the assessee committed default, it was liable to penalty and as such, assessed tax has to be calculated in accordance with the said sub-s. (2). But, in the present case, the amount of the assessed tax not being nil and the amount of penalty being capable of quantification, there can be no two opinions that the assessee was liable to penalty within the meaning of sub-s. (2). The Tribunal, therefore, went wrong in holding that the assessee was not liable to penalty even after recording the finding that there was no reasonable cause for not filing the return in time. Consequently, question No. 2 is also answered in the negative and against the assessee.
P.C Jain, A.C.J:— I agree.