1. The assesses in this cage was assessed for the years 1944-45 and 1946-46. He failed to make the full payment in respect of his assessment for these years. Thereupon on 23 6 1948, the Income-tax Officer purported to pass an order to the following effect. 'Tax not paid; Issue Penalty Notice.' Pursuant to this order a demand was made for payment under Section 29 and the notice of demand mentioned what was the amount of penalty that the assessee had to pay. The assesses appealed to the Appellate Assistant Commissioner from the order under Section 46(1) and the Appellate Assistant Commissioner reduced the penalty. Then there was an appeal to the Tribunal and the Tribunal upheld the decision of the Appellate Assistant Commissioner.
2. The contention urged before the Tribunal and also before us is that the penalty imposed was contrary to law inasmuch as no proper order was passed by the Income-tax Officer under Section 46 (i). That sub-section provides that when an assessee is in default in making payment of income-tax the Income-tax Officer may in his discretion direct that in addition to the amount in arrears a sum not exceeding that amount shall be recovered from the assesses. It is clear that the direction that the Income-tax Officer has to give under Section 16 (1) must be a direction which must take the form of an order and that order must state the specific sum which the assessee hag got to pay by way of penalty. The limitation laid down upon the Income-tax Officer under, that sub-section is that the amount which the assessee has to pay as penalty mast not exceed the amount of arrears.
3. Now, the contention of Mr. Joshi is that Section 46 (1) merely provides for a departmental direction to be given by the Income-tax Officer. According to him that departmental direction is carried out when the notice of demand is given under Section 39 and it is sufficient if to the notice of demand the actual amount which has to be paid by the asseesee is mentioned. Now, when we turn to Section 59, what it provides is that when any tax penalty or interest is due in consequence of any order passed under or in pursuance of the Income-tax Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable. Therefore, the notice of demand can only be served under this section provided tax, penalty or interest is due in consequence of an order passed under the Act, Therefore, the condition precedent to the validity of the notice of demand under Section 29 must be an order passed under the Act, and the notice is merely consequential upon that order. Therefore, if there is no order under the Act, then no notice can be served under Section 29. Therefore, if Mr. Joshi's contention is sound that no order is required under Section 46 (1) and IB fact no order wag passed under that sub-section, then the notice of demand under Section 29 is clearly bad and there was no liability on the assessee to comply with that notice.
4. As I stated before the contention of Mr. Joahi that no order is required under Section 46 (1) is clearly untenable, because when one looks at the scheme of the Act a right of appeal is provided by Section 30 of the Act against the penalty imposed, and it cannot be suggested that the right of appeal given under Section 30 is against a direction made by the Income-tax Officer under Section 46 (1) which does not even specify what is the amount of the penalty which the assessee has got to pay. Under Section 46 (1) there must not only be a formal order which imposes a penalty but it must also specify the actual amount of the penalty which the assesses is liable to pay. After that order is passed, then consequential upon that order, a notice of demand may be served under Section 29 and the assessee has a right of appeal against such order under Section 30 of the Act.
5. Inasmuch as the order passed by the Income-tax Officer in this case under Section 46 (i) does not specify the amount of the penalty, the order is bad and the notice of demand is equally bad as it follows upon an invalid order of the Income-tax Officer. In the result the penalty imposed by the Income-tax Officer is not valid in law and we shall therefore answer the question referred to us in the negative. The Commissioner to pay the costs of the reference.
6. Reference answered.