J.S. VERMA, C.J.—-This is a reference under section 256 (1) of the Income tax Act, 1961 at the instance of the Revenue to decide the following question of law, namely: — "Whether on the facts and in the circumstances of the case, was the Tribunal right in law in holding that no penalty under section 271 (1) (a) of the Income-tax Act, 1961 is leviable in this case of the assessee, a Registered Firm, because it has no tax liability within the meaning of subclause (b), read with Explanation to clause (i) of section 271 (1) (a) of the income-tax Act, 1961?" 2. The relevant assessment year is 1978-79. The assessee was a registered firm which was required to file the return upto June 30, 1978. However, the assessee filed the return late of November 28, 1978. The Income-tax Officer on completing the assessment determined the amount of Rs. 25.000/- as the tax payable by the assessee. However, the tax deducted at source amounted to Rs. 40,000/- approximately with the result the assessee became entitled to refund of a considerable amount which he had deposited in excess the tax found payable by him. Inspite of this situation the Income-tax Officer initiated penalty proceedings against the assessee on the ground of late filing of return under section 271 (1) (a) (i) (b) read with section 139 (1) of the Income-tax Act, 1961. The Income-tax Officer rejected the assessees contention that since there was assessed tax according to its meaning given in the explanation to sub-clause (i) (b) of clause (a) of sub-section (1) of section 271 because the tax deducted at source was in-excess of the amount of tax found payable by the assessee, there was no question of levy any penalty. This contention of the assessee was how accepted by the Commissioner of Income-tax (Appeals) in appeal and thereafter by the Tribunal in a further appeal. Hence this reference at the instance of the Revenue. 3. This contention of the assessee was how accepted by the Commissioner of Income-tax (Appeals) in appeal and thereafter by the Tribunal in a further appeal. Hence this reference at the instance of the Revenue. 3. The real question for decision is, whether any penalty can be levied under section 271 (1) (a) (i) (b) of the Act in the case of failure to file return within the time allowed by sub-section (1) of section 139 even when it is found on completing the assessment that the tax deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C is equal to or in excess of the amount of tax found payable by the assessee. The relevant part of section 271(1) (i) (b) is as under— "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 xxx xxx xxx xxx xxx xxx xxx xxx he may direct that such person shall pay by way of penalty :— (i) in the cases referred to in clause (a):- xxx xxx xxx xxx (b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two percent of the assessed tax for every month which the default continued; Explanation:- In this clause "assessed tax" means tax as reduced the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C." 4. Assuming that the above penalty provision is attracted even when the tax deducted at source or paid in advance is equal to or in excess of the amount of tax found payable on assessment in the event of failure to furnish the return of total income within the time allowed by sub-section (1) of section 139 the point is whether any penalty, infact, can be levied according to this provision. The penalty which can be imposed according to this provision "in addition to the amount of tax, if any, payable " is " a sum equal to two percent of the assessed tax for every month during which the default continued". The expression "assessed tax" according to the Explanation means "tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVll-C." The result of applying this formula to calculate the penalty in a case like the present where no amount of tax remained to be paid on completion of the assessment may now be seen to find out the tenability of the argument advanced on behalf of the Revenue. In such a situation there is no amount of tax remaining due and, therefore, nothing is required to be paid as the tax. The penalty has to be calculated at a sum equal to two percent of the assessed tax for every month during which the default continued. The "assessed tax" in a case like this would be zero since the tax deducted at source or paid in advance is equal to or in excess of the total tax assessed. Since the tax due is nil and so also the assessed tax" within the meaning of that expression any figure multiplied by zero will also be zero. The result is that even if this provision is to be attracted to a case like the present, the amount of penalty would be zero according to the mode of calculating the penalty prescribed in it, and, therefore in effect no penalty can be recovered. The result is that even if this provision is to be attracted to a case like the present, the amount of penalty would be zero according to the mode of calculating the penalty prescribed in it, and, therefore in effect no penalty can be recovered. In our opinion, this logical consequence flowing from the provision it is sufficient to indicate that no penalty can be levied under section 271(1) (a) (i) (b) of the Act in a case like the present where the tax deducted at source or paid in advance is equal to or in excess of the amount of tax found to be payable on completion of the assessment. 5. We may now refer to another consequence of failure to file return within the time allowed under sub-section (1) of section 139 which is provided in sub-section (8) of section 139. According to sub-section (8) of section 139, in such a situation the assessee is liable to pay simple interest at the prescribed rate for the specified period "on the amount of the tax payable on the total income as determined on regular assessment, as reduced by the advance tax, if any, paid and any tax deducted at source." A similar question arose about the liability of the assessee, a registered firm to pay interest in accordance with sub-section (8) of section 139 on its failure to file the return within the time allowed under sub-section (1.) of section 139. The Supreme Court in Ganesh Dass Shreeram V. Income-tax Officer, A Ward, Shillong (1) held as follows:— "Before we part with these appeals, we think we should clarify one situation, namely, 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 tax allowed, regard being had to the fact that payment of 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." 6. As the entire amount of tax is paid by way of advance tax, the question of payment of any compensation does not arise." 6. We find no reason why the same principle should not be applied also to the question of imposition of penalty when the facts on which the penalty is to be levied are the same which give rise to the liability for payment of interest and the expression used in sub-section (8) of section 139 for specifying the amount on which the interest is to be calculated in substantially the same as in sub-clause (i) (b) of clause (a) of sub-section (1) of section 271. The Supreme Court has pointed out that since the entire amount of tax had already been paid the question of recovering any interest does not arise. In our opinion, for the same reason where the entire amount of tax has already been paid, being deducted at source or paid in advance, the question of imposing any penalty on the assessed tax" does not arise, because no tax is actually due. 7. Learned counsel for the Revenue placed reliance on sub-section (2) of section 271 to contend that a registered firm is to be treated as an unregist-ered firm when penalty is impossible on it under sub-section (1) and, therefore, the tax liability of an unregistered firm being greater there would be same tax due as a result of the registered firm being treated as unregistered firm. It was urged that on this basis it would be possible to hold that there is some tax due on which the penalty can be calculated according to the above provision. We find it difficult to accept this contention and to use it for construing sub-section 271 (1) (a) (i) (b) in the manner suggested by the Revenue. In the first place, sub-section (2) of sec. 271 is attracted only for quantification of the penalty when it is impossible under sub-section (1). In that event the registered firm loses the benefit of registration and the penalty for which it has become liable has to be calculated depriving it of the benefit of registration and treating it as an unregistered firm. 271 is attracted only for quantification of the penalty when it is impossible under sub-section (1). In that event the registered firm loses the benefit of registration and the penalty for which it has become liable has to be calculated depriving it of the benefit of registration and treating it as an unregistered firm. This does not mean that for the purpose of deciding the liability for penalty under sub-section (1) effect has to be first given to sub -section (2) of section 271 in order to make the formula for calculating the penalty under sub-section (I) workable. That apart this argument based on sub-section (2) of section 271 can obviously be relied on for construing sub-section (1) thereof only when the assessee is a firm and not when the assessee belongs to any other category of person defined in section 2(31) of the Act. It is obvious that the benefit of sub-section (2) of section 271 not being available in case of an assessee other than a registered firm, the impracticability of imposing any penalty under section 271 (1) (a) (i) (b) in a case where tax due is nil is not met by this argument. This is another reason to support the view that sub-section (2) of section 271 cannot be used in the manner suggested on behalf of the Revenue. 8. We shall now refer to the conflicting decisions on the point of several High Courts which have been cited at the Bar. We may however mention at the out set that all these decisions were rendered prior to the aforesaid decision of the Supreme Court in Ganesh Shreerams case (supra) by which it has been settled that in such a situation no interest can be imposed under sub-section (8) of section 139, the liability of such interest and penalty both arising on the same facts. 9. We shall first refer to the decision which favour the Revenue. The decisions of the Patna High Court are : Jamunadas Mannalal V. Commissioner of Income tax Bihar (2); and Jamunadass Mannalal v. Commissioner of Income tax (3) It has been held therein that penalty under section 271 (1) (a) of the Income-tax Act, 1961 can be levied for delay in filing the return even after charging interest under section 139 (8). Obviously these decisions proceed on the basis that in such a situation where no tax is found due after adjusting the tax deducted at source or deposited as advance tax, interest also is chargeable under section 139 (8) of the Act in addition to the penalty under section 271 (I) (a). In view of the above Supreme Court decision in Ganesh Dass Shreerams case (supra) it cannot be doubted that no interest can be recovered under section 139 (8) in such a situation. Accordingly, the assumption on which these decisions proceed is no longer available. It has also been held that sub-section (2) of section 271 enables the registered firm to be treated as an unregistered firm and, therefore, penalty can be calculated on the basis of tax liability on an unregistered firm. We have already indicated our reasons for taking the view that sub section (2) of section 271 is not available for this purpose. With respect we are unable to concur with the view taken in these decisions of the Patna High Court for the reasons already given. The Bombay High Court in Commissioner of Income-tax V. Janata Trading Co. (4) appears to have taken the same view that where tax found payable by the registered firm is nil penalty can be imposed under section 271 (1) (a) for delay in filing the return because the amount of tax assessed on it as an unregistered firm by virtue of section 271 (2) of the Act is to be taken into account for computing the penalty. In our opinion, the facts of the Bombay decision indicate that the tax payable by the registered firm was not nil so that there was some tax due on which penalty could be calculated under section 271(1) (a) (i) (b) but by virtue of section 271(2) it was the larger amount of tax on the assessee treating it as an unregistered firm which formed the basis of calculation of penalty. That was a case in which the amount of tax paid earlier by the assessee was the self assessment tax under section 140-A under Chapter XIV and not tax deducted at source under Chapter XV1I-B or paid in advance under Chapter XVII C which alone can be adjusted according to the meaning of assessed tax in the Explanation of sub-clause (i) (b) of clause (a) of sub-section (1) of section 271. This being so the "assessed tax" was not nil and, therefore, imposition of penalty could not be assailed on this ground. The Bombay decision is clearly distinguishable on facts. 10. There are three decisions of the Madras High Court: Commissioner of Income-tax, Madras (Central) V. Kandoswami Weaving Factory & Co. (5), Additional Commissioner of Income-tax, Madras II V. Murugan Timber De-post (6); and Commissioner of Income-tax Tamil Nadu II V. Forra Bor. (7). The earlier decision in Kandoswami Weaving Factory & Cos. case (supra) has been distinguished in the last decision where it was held that where the assessee had paid advance tax under Chapter XVII C in excess of the tax assessed, there was no amount of which two per cent of the tax can be calculated for the purpose of section 271(1) (a) (i) (b) of the Act. Same is the view taken in Murugan Timber Depots case (supra). The view of the Madras High Court, therefore, is against the Revenue. A decision of the Calcutta High Court in C.I.T., West Bengal-Ill V. Priya Gopal Bishoyee (8) is also distinguishable on facts. In that case the tax payable by the assessee even as a registered firm was paid more than 2-1/2 years after filing the return which itself was delayed by over 15 months. Obviously for this reasons "assessed tax" was not nil and it was feasible to calculate the penalty under section 271(1) (a) (b) taking into account the tax payable by the assessee as a registered firm; and then by virtue of section 271(2) quantification of penalty was made on the larger amount of tax payable by the assessee treating it as an unregistered firm. The Calcutta decision also does not, therefore, support the Revenues contention that even where the assessed tax" is nil, penalty can be imposed on the assessee under section 271(1) (a) (i) (b) of the Act. 11. In addition to the view of the Madras High Court against the Revenue which has already been mentioned, the view taken by the Gauhati High Court and Andhra Pradesh High Court is also against the Revenue. These decisions are: Commissioner of Incorne-Tax, Assam, Nagaland etc. V. Maskara Tea Estate (9); C.I.T. North Eastern Zone V. Ganesh Das Shreeram (firm) (10); and P. Venkata Krishnayya Naidu and son V. C.I.T., Andhra Pradesh, Hyderabad (11). These decisions are: Commissioner of Incorne-Tax, Assam, Nagaland etc. V. Maskara Tea Estate (9); C.I.T. North Eastern Zone V. Ganesh Das Shreeram (firm) (10); and P. Venkata Krishnayya Naidu and son V. C.I.T., Andhra Pradesh, Hyderabad (11). The view taken in these decisions is that the legal fiction in section 271(2) was limited to quantification of penalty on registered firm, if any penalty was leviable on it under section 271(l)(a); and that where the "assessed tax" on a registered firm was nil, no penalty could be levied under section 271(1) (a) for failure to furnish the return in time. With respect we concur with this view as already indicated by us. 12. After the Supreme Court decision in Ganesh Dass Shreerams case (supra)which has clearly held that no interest can be recovered under sec. 139(8) of the Act where the tax liability is nil for failure to file the return within the time allowed, it must be held that on the same reasoning no penalty also can be imposed under section 271(1 )(a)(i)(b) of the Act since the liability for payment of interest and penalty both arise on the same facts and is to be computed similarly. The Tribunal has taken the same view and, therefore, it must be upheld. 13. Consequently, the reference is answered against the Revenue and in favour of the assessee by holding that the Tribunal was justified in taking the view that no penalty under section 271(1) (a) (i) (b) of the Income-tax Act, 1961 is leviable against; the assessee, a registered firm, because it had no tax liability within the meaning of the expression "assessed tax" given in the Explanation in sub clause (i) b) of clause (a) of sub-section (1) of section 271 of the Income-tax Act, 1961. No costs.