1. By this Reference Application presented on 12th January, 1995, the Revenue has required the Tribunal to refer the following questions, said to be of law and arising out of the order of the Tribunal passed on 29th November, 1994 in ITA No. 264/Pat/1990, to the Hon'ble High Court of Judicature for its esteemed opinion : "1. Whether, on the facts and in the circumstances of the case, the assessee being a registered firm was liable to pay penalty under s.
271(1)(a), r/w s. 271(2) even though the assessed tax within the meaning of Expln. to s. 271(1)(i) of the Act was a negative figure 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the order of the Asstt. CIT by reversing the order of the CIT(A) ?" 2. We are not inclined to refer the abovementioned two questions because this Tribunal, while allowing the Revenue's appeal have considered the decisions relied upon by the assessee's counsel which are enumerated in para 5 of the Tribunal's appeal order dt. 29th November, 1994, and also considered the decision of the Hon'ble Supreme Court in the case of Ganesh Dass Sreeram vs. ITO (1988) 169 ITR 221 (SC) and found that none of the case law could assist the assessee's case. Further the Tribunal, while allowing the Revenue's appeal relied upon the Full Bench decision of the Hon'ble Patna High Court rendered in the case of Jamunadas Munnalal vs. CIT (1985) 152 ITR 261 (Pat)(FB).
Since the controversy stands covered by the decision of the jurisdictional High Court in the aforesaid case of Jamunadas Munnalal (supra), it will be futile and also of academic interest to refer the abovementioned two questions sought for by the assessee.
3. The assessee's counsel, A. K. Rastogi, however, made very strenuous efforts to convince us that reference of the above two questions may be made to their Lordships of the Patna High Court particularly in view of the decision of the Hon'ble Supreme Court in the case of Ganesh Dass Sreeram (supra) which was not available before the Full Bench of the Hon'ble Patna High Court when it rendered the decision in the case of Jamunadas Munnalal (supra). Whatever may be the situation, we are bound by the Full Bench decision of the Hon'ble Patna High Court which has been followed by this Tribunal while reversing the order of the first appellate authority and allowing the Revenue's appeal.
1. I have gone through carefully the order passed by my learned brother and have had the benefit of discussions with him also. However, with respect, I have not been able to agree with the decision arrived at. In my opinion, it is a fit case for referring the proposed question, though in modified form, to the Hon'ble High Court for its esteemed opinion. I, therefore, proceed to draw up a statement of the case.
2. The Tribunal has, after due consideration of various decisions cited before it, followed the decision of the jurisdictional High Court in the case of Jamunadas Munnalal (supra) and held that penalty is leviable under s. 271(1)(a) of the IT Act, 1961, though tax deducted at source of Rs. 68,606 exceeded the tax assessed on the assessee as a registered firm of Rs. 67,934. For this purpose, the AO had computed the tax on assessed income as an unregistered firm in terms of s.
271(2) of the IT Act, 1961 and the tax on assessed income so found by him was Rs. 1,69,556. After giving credit to the tax deducted at source, the balance tax payable was Rs. 1,00,950. Penalty for 29 months @ 2 per cent. of the assessed tax came to Rs. 58,551.
3. The CIT(A) cancelled the penalty considering the decision of the Supreme Court in the case of Ganesh Dass Sreeram (supra).
4. The Tribunal had first allowed the Departmental appeal by order dt.
18th May, 1984, but since the order was ex parte, it was recalled in MA No. 17/Pat/1994 dt. 9th August, 1994.
5. It was submitted on behalf of the Revenue that the decision of the Hon'ble Supreme Court in the case of Ganesh Dass Sreeram (supra) was not applicable and the matter was directly covered by the Full Bench decision of the Hon'ble Patna High Court in the case of Jamunadas Munnalal (supra). The learned counsel for the assessee, on the other hand, relied on the decision of the Rajasthan High Court in CIT vs.
Builders Engineers Co. (1989) 175 ITR 317 (Raj) and CIT vs. Braham Prakash & Co. (1989) 179 ITR 422 (P&H) and two more decisions. The Tribunal took a view that the decision of the Hon'ble Supreme Court in the case of Ganesh Dass Sreeram (supra) related to interest leviable under s. 139(8), for which there was no provision corresponding to s.
271(2) of the Act, where it was laid down that for the purpose of levy of penalty the firm is to be treated as unregistered firm and the tax assessed is to be determined accordingly. It was, thereafter, held that penalty was leviable and the order of the CIT(A) was reversed.
6. The learned counsel for the assessee has placed before us a decision of the SMC Bench of the Tribunal at Patna in the case of ITO vs.
Kapildeo Prasad [IT Appeal No. 195 (Pat) of 1988 dt. 9th November, 1989] for asst. yr. 1983-84 where a similar issue was involved and it was held that the ratio laid down by the Hon'ble Supreme Court in the case of Ganesh Dass Sreeram (supra) for levy of interest will be equally applicable for imposition of penalty. He also relied on the following decisions : The learned Departmental Representative, on the other hand, submitted that since the matter stood concluded by the decision of the jurisdictional High Court, no referable question of law arose.
7. I have gone through the rival submissions carefully. The decision of the Full Bench of the Patna High Court in the case of Jamunadas Munnalal (supra) was delivered on 21st May, 1984. It was held that a registered firm is liable to pay penalty calculated on the basis of tax on an unregistered firm even though the firm has paid advance tax and its entire tax liability as a registered firm has been fully discharged by the payment of advance taxes. In coming to this decision, the language of s. 271(2) of the Act was considered according to which, while quantifying the penalty for the default of the registered firm in filing its return within time, the assessed tax is not to be taken as the tax payable by the assessee as a registered firm. Its assessed tax for the purpose of imposition of penalty shall be that which shall be determined the footing that it is an unregistered firm.
8. Subsequently, in the case of Ganesh Dass Sreeram (supra), it was held by the Supreme Court that where the advance tax duly paid covers the entire amount of tax assessed, there is no question of charging the registered firm with interest even though the return is filed by it beyond the time allowed, regard being had to be fact that payment to interest is only compensatory in nature. As the entire amount of tax is paid by way of advance tax, the question of payment of any compensation does not arise.
9. Thereafter the decision in the case of Builders Engineers Co.
(supra) was delivered on 12th August, 1988, that is, after the decision in the case of Ganesh Dass Sreeram (supra). Considering the above decision, it was held that on the same reasoning, no penalty can be imposed on registered firm under s. 271(1)(a) of the Act for filing the return beyond the time allowed where the entire amount of tax has already been paid, being deducted at source or paid in advance, since the liability for payment of interest and penalty both arose on the same facts and is to be computed similarly.
10. The above decision was followed by the Punjab & Haryana High Court in the case of Harish Chand & Co. (supra). The ratio of the decision of the Hon'ble Supreme Court in Ganesh Dass Sreeram's case (supra) was followed and it was held that no penalty is leviable under s. 271(1)(a) of the IT Act, 1961 for delay in filing the return where the tax deducted at source or paid in advance is equal to or exceeds the assessed tax payable by registered firm.
11. On the other hand, there is a contrary decision of the Madhya Pradesh High Court in the case of Kaluram Ladharam vs. CIT (1990) 184 ITR 294 (MP). After noticing the decision of the Supreme Court in the case of Ganesh Dass Sreeram (supra) as well as the decision of the Rajasthan High Court in Builders Engineers Co.'s case (supra), it was held that the decision of the Supreme Court deals with the question of charging interest when the return is filed beyond time and is not attracted in considering the imposition of penalty under s. 271(1)(a).
It was held that in order to calculate penalty the tax payable by the assessee on the income assessed has to be determined on the basis that the assessee is an unregistered firm and the penalty has to be calculated on the tax so determined. It was further held that penalty was imposable under s. 271(1)(a), r/w s. 271(2) of the Act. It may be stated that this decision was mentioned by the Bench in the Court.
12. The decision of the jurisdictional High Court is certainly binding on the Tribunal at Patna. However, here the question is whether the decision of the jurisdictional High Court in the case of Jamunadas Munnalal (supra) stands modified by a subsequent decision of the Supreme Court in the case of Ganesh Dass Sreeram (supra). An SMC Bench of the Tribunal at Patna in the case of Kapildeo Prasad (supra) has taken a view that it stands modified. The High Courts of Rajasthan in the case of Builders Engineers Co. (supra) and Punjab & Haryana in the case of Harish Chand & Co. (supra) have taken a view that it stands modified. The Hon'ble Madhya Pradesh High Court has taken a contrary view that it does not stand modified.
13. In this connection, the learned counsel for the assessee has rightly relied on the decision of the Supreme Court in the case of D.B. Madan (supra) where it was held that it cannot always be said that, in all cases where a similar question of law had been answered in an earlier case in a particular way, an identical question of law arising in a later case would cease to be a referable one. In my opinion, this is one of such exceptional case where, in view of the divergence of opinion described above, a referable question of law arises which deserves to be referred to the Hon'ble Patna High Court for its opinion.
14. The questions as framed in the reference application by the assessee do not bring out the real controversy and, in fact, question No. 1 even contains an answer in favour of the assessee. I would, therefore, reframe the two questions into only one question as below : "Whether, on the facts and in the circumstances of the case, the assessee being a registered firm was liable to pay penalty under s.
271(1)(a) r/w s. 271(2) of the IT Act, 1961 even though the tax deducted at source exceeded the tax payable as a registered firm ?" Since there is a difference of opinion between us whether the question of law is a referable one or not, the following question is referred to the Hon'ble President for reference to Third Member as laid down in s.
255(4) of the Act - "Whether the following question of law is a referable one under s.
256(1) of the IT Act, 1961 to the Hon'ble Patna High Court for its opinion - 'Whether, on the facts and in the circumstances of the case, the assessee being a registered firm was liable to pay penalty under s.
271(1)(a) r/w s. 271(2) of the IT Act, 1961 even though the tax deducted at source exceeded the tax payable as a registered firm ?'" 1. This is a reference application in the disposal of which the two learned Members differed with each other. The point of difference is referred to Third Member and it is as follows : "Whether, on the facts and in the circumstances of the case, the assessee being a registered firm was liable to pay penalty under s.
271(1)(a), r/w s. 271(2) of the IT Act, 1961 even though the tax deducted at source exceeded the tax payable as a registered firm ?" 2. The President constituted himself as a Third Member and had taken up the disposal of the matter. The facts necessary for disposal are the following : The assessee is a registered firm which derives income from contracts.
For the asst. yr. 1985-86, the due date for filing of the income-tax return was on or before 31st July, 1985. However, it did not file its return till 11th January, 1988. Penalty proceedings were consequently initiated in the assessment order under s. 271(1)(a). The tax payable on the assessed income was Rs. 67,934. However, the tax deducted at source was Rs. 68,606. In view of this in the assessment year no tax was assessed as payable. However, in the penalty proceedings initiated under s. 271(1)(a) a penalty of Rs. 58,551 was levied treating the assessee as unregistered firm for the purpose of calculating the penalty. The penalty was, however, deleted in appeal filed before the learned CIT(A)-I, Patna. The order of the learned CIT(A)-I, Patna dt.
9th January, 1990 was reversed by the Division Bench of this Tribunal on 29th November, 1994, by its orders delivered in ITA No. 264/Pat/1990 mainly relying upon the Full Bench decision of the Hon'ble Patna High Court in Jamunadas Munnalal's case (supra). It is, no doubt, true that before this Tribunal, the decision of the Hon'ble Supreme Court in the case of Ganesh Dass Sreeram (supra) was cited. However, the Tribunal in its order dt. 29th November, 1994 held that the said decision of the Hon'ble Supreme Court was not applicable and the matter was fully covered by the Full Bench decision of the Hon'ble Patna High Court in Jamunadas Munnalal's case (supra).
3. The assessee filed a reference application. While disposing of the reference application there was a difference of opinion between the learned Judicial Member who held in his order of February, 1995, that the reference application is to be rejected whereas the learned Accountant Member by his order dt. 9th March, 1995, opined that one consolidated question in the place of the two proposed questions suggested for reference should be referred to the High Court for its opinion under s. 256(1). The consolidated question, which according to the learned Accountant Member is worthy of reference, is as follows : "Whether, on the facts and in the circumstances of the case, the assessee being a registered firm was liable to pay penalty under s.
271(1)(a), r/w s. 271(2) of the IT Act even though the tax deducted at source exceeded the tax payable as a registered firm ?" 4. I have heard A. K. Rastogi for the assessee and P. C. Mishra, the learned Departmental Representative for the Department.
5. After fully going through the orders of the differing Members and after hearing both sides, I hold that the reference to the High Court under s. 256(1) should have been granted and I fully agree with the Accountant Member's order dt. 9th March, 1995. It is noteworthy that when the reference was heard earlier by the Division Bench Members it was submitted before them that the Patna High Court's Full Bench decision is not worthy to be followed inasmuch as by the date of the judgment of the Full Bench they had not the advantage of having the decision of the Hon'ble Supreme Court in Ganesh Dass Sreeram's case (supra) and, therefore, the Full Bench decision of the Patna High Court should not have been preferred to be followed while reversing the order of the first appellate authority. While recording this argument in his order, the learned Judicial Member held "Whatever may be the situation, we are bound by the Full Bench decision of the Hon'ble Patna High Court which has been followed by this Tribunal while reversing the order of the first appellate authority and allowing the Revenue's appeal". Thus, he rejected the application. It is significant to note that the CIT(A) while cancelling the penalty levied by the ITO had followed the Hon'ble Supreme Court's decision in Ganesh Dass Sreeram's case (supra). Now while arguing the case before me, the learned counsel for the assessee brought to my notice a recent judgment of the Hon'ble Patna High Court in the case of CIT vs. Jindal Bros. 1996 (2) PLJR and also filed a photocopy of it. There the main question which was considered by the Hon'ble Patna High Court was "whether the decision in Ganesh Dass Sreeram's case (supra) has overruled the decision of Full Bench in Jamunadas Munnalal's case (supra). At para 9 of the orders, the latest Patna High Court decision held the following : "Thus, as rightly submitted by the counsel for the assessee, not only the preponderance of opinion of different High Courts is that where no tax is payable the question of imposing penalty under s.
271(1) does not arise but as a matter of fact, after the decision in Ganesh Dass Sreeram's case (supra), they are unanimous in saying so.
The decision of this Court in Jamunadas Munnalal (supra), no doubt, had held to the contrary but in view of the observations of the Supreme Court in Ganesh Dass Sreeram's case (supra), interpreted and applied unanimously by different High Courts the same cannot be said to be laying down the correct law on the point and, therefore, I find it difficult to follow the same." 6. In view of the Hon'ble Patna High Court that the decision in Jamunadas Munnalal's case (supra) has been overruled by the Hon'ble Supreme Court in their judgment in Ganesh Dass Sreeram's case (supra), I hold that the reference ought to have been granted to the High Court under s. 256(1) of the IT Act. Thus, I fully agree with V. K. Sinha, the learned Accountant Member's order dt. 9th March, 1995. I direct that the matter should go back before the Division Bench which is expected to follow the majority view in this matter.