: R. N. Mittal, J. - On the application of the Commissioner of Income-tax, Amritsar, the Income-tax Tribunal, Amritsar, referred the following two questions u/s 256 of the Income-tax Act (hereinafter to be referred to as the Act(for opinion of this Court :-
(1) 'Was the Tribunal, on the facts and in the circumstances of the case, right in holding that the tax which is to form basis of computation of the penalty u/s 271(1)(i) of the Income-tax Act is the amount shown in the demand notice as payable even if the working out of that amount covers some amount refundable for a different assessment year' ?
(2) 'Whether on the facts of the case the Appellate Tribunal was right in holding that s. 271(2) of the Income-tax Act could not be given effect to in cases where the tax demanded u/s 156 of the income-tax Act from the assessee as a registered firm was nil'.
2. Briefly, the facts of the case are that M/s. Gian Talkies, Abohar, is a partnership firm. It has to furnish Income-tax return relating to assessment year 1967-68, by November 15, 1967, but it was actually furnished on January 28, 1969. Thus there was a delay of 14 months in filing the return. The Income-tax Officer initiated penalty proceedings vide notice dated January 20, 1969. He imposed a penalty of Rs. 5867/- vide order dated September, 24, 1969 holding that the delay appeared to be willful and deliberate.
3. The assessee went up in appeal before the Appellate Assistant Commissioner. He held that the penalty had been imposed not on the basis of the show-cause notice dated January 20, 1969, but on the basis of a revised show cause notice dated January 28, 1969, which was issued after the receipt of the income-tax return on January 28, 1969. He further held that by virtue of provisions of s. 271(2) of the Act the penalty could be levied even if the demand notice, addressed to the registered firm, showed the demand to be nil. He, consequently, affirmed the order of penalty but directed that the tax forming basis of computation of the penalty be re-calculated taking into consideration the payment of Rs. 862/- by way of advance tax.
4. The assessee went up in appeal before Income-tax Tribunal which by its order dated March 31, 1972, deleted the penalty on the ground that in face of demand notice showing nil demand there was no tax payable by the assessee which could form basis of the computation of penalty. The Tribunal further noted that the nil demand had resulted noted that the nil demand had resulted from that the tax from the total income of the assessee came to Rs. 2,330/- and that the assessee had paid Rs. 862/- as advance tax and Rs. 1,468/- as self-assessed tax u/s 140A(1) of the Act.
5. The Revenue filed in application of the Tribunals order, on August 13, 1972. The said application stated that a demand notice for total demand of Rs. 2,330/- plus interest amounting to Rs. 1,895/- was prepared on January 31, 1969; that demand notice was served only on May 1, 1969; that in the mean time certain amount had fallen due to the assessee by way of refund for the assessment year 1963-64; that as a result of incorporation or adjustment of the refund amount for the assessment year 1963-64 in the demand notice for the assessment year 1967-68 the demand came to be nil. At the hearing of the application, the assessee conceded that it had not paid any self-assessment tax. The Tribunal thereupon on December 13, 1972 held that the existence of nil demand, based partly on credit for Rs. 1,468/- paid u/s 140A had influenced the Tribunals judgment leading to the earlier order. Consequently, the appeal was restored to the file for a fresh hearing.
6. The Tribunal confirmed its earlier order vide order dated February 19, 1974. In that order it took the view that whatever be the basis of computation resulting in issue of the demand notice showing nil demand, no penalty would be exigible u/s 271(1)(i) of the Act, if the demand as per demand notice for the assessment year 1967-68 was nil.
7. The CIT, as stated above, filed an application for referring the abovesaid questions for opinion of this Court. The application was accepted by the Tribunal and the questions were referred.
8. It is contended by the learned counsel for the Revenue that after the decision of the case by the Tribunal, s. 271(1)(i) of Act was amended by Direct Taxes Amendment Act, 1974 (hereinafter to referred to as the Amendment Act), instead of the word tax, the assessed tax have been used in cl. (i). He further argues that retrospective effect had been given to the said amendment from the commencement of the Act. According to the counsel, in view of the amendment, if the assessee did not furnish within the time allowed, he has liable to pay penalty equal to two per cent of the assessed tax for every month during which the default continued.
9. We have heard the counsel at a considerable length. It is disputed that the Tribunal decided the case of the assessee on February 19, 1974 and the matter was referred to this Court on September 5, 1974. The amendment Act was published in the Government Gazette on August 19, 1974 and was given retrospective effect. Thus at the time when the question was referred to this Court the relevant section stood amended with retrospective effect. In view of the amendment, the referred question did not arise. It appears that at that time the Amendment Act was not to the notice of the Tribunal, other wise the question would not have been referred to this court. It is established principle of law that the High Court may decline to answer question of law if these do not arise in the case. It cannot be disputed that on account of the Amendment Act; the questions referred to are now of academic interest only.
10. There is another point of view from which the matter may be examined. As stated above, the Amendment Act was published in the Government Gazette on August 19, 1974. After enactment of the Amendment Act an application for rectification was maintainable u/s 155 of the Act before the Tribunal, as it is an established principle of law that what is mistake in the light of retrospective effect legislation, can be rectified under the said section. A period of four years is provided for making application for rectification. After taking into consideration all the aforesaid circumstances, we are of view that it is not necessary to decide the question referred to this Court, as these did not arise and now are of academic interest only.
11. In fairness to the learned counsel for the Revenue it may be stated that the referred to CIT, Madras, Central v. Kandaswami Weaving Factory & Co., wherein a question which was similar to question No. 1 was referred by the Tribunal and in view of the Amendment Act it was decided in favour of the Revenue. Learned counsel argued that in view of the ratio in that case, the question needs consideration. We are unable to accept the contention. No objection was taken in that case before the High Court that in view of the Amendment Act the question was of academic interest only. It is also not clear from the facts as to whether the Amendment Act came before referring the question to the High Court or thereafter. In view of the aforesaid circumstances, the counsel cannot derive any benefit from that case.
12. For the reasons above, we decline to answer the question. No order as to costs.