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Commissioner of Income-tax Vs. Sreerama and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 14 of 1973
Judge
Reported in[1975]101ITR531(AP)
ActsIncome Tax Act, 1961 - Sections 156, 207, 208, 209, 219, 221 and 221(1)
AppellantCommissioner of Income-tax
RespondentSreerama and Co.
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateK. Jagannadha Raju and ;K. Peddi Reddi, Advs.
Excerpt:
direct taxation - penalty - sections 156, 207, 208, 219, 221 and 221 (1) of income tax act, 1961 - penalty imposed on assessee on default in making payment of advance tax - tribunal disallowed imposition of penalty - case referred to high court - section 210 empowered income tax officer (ito) to require assessee to pay advance tax - ito was deemed to be competent authority under section 221 to impose penalty in default - held, penalty was validly imposed. - - the income-tax officer has no power to levy penalty for failure to pay advance tax within the time allowed......income-tax chargeable under the provisions of this act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this act prior to the aforsaid date.'6. the charging provision is section 4 and it reads :'4. (1) where any central act enacts that income-tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of, this act in respect of the total income of the previous year or previous years, as the case may be, of every person : provided that where by virtue of any provision of this act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged.....
Judgment:

Obul Reddi, C.J.

1. The question referred to us by the Tribunal under Section 256(1) of the Income-tax Act for our decision is:

'Whether, on the facts and in the circumstances of the case, penalty levied by the Income-tax Officer under Section 221(1) of the Income-tax Act, 1961, for default in payment of advance tax is valid in law ?'

2. The facts giving rise to this reference are these. The assessee was served with a notice of demand under Section 156 of the Act for the year 1969-70 for payment of advance tax of Rs. 54,910. That was on August 21, 1968. He was asked to pay the advance tax in three instalments on or before September 1, 1968, December 1, 1968, and March 1, 1969. The assessee defaulted in payment of the first and second instalments. Then a show-cause notice was issued by the Income-tax Officer proposing to levy penalty and, thereafter, a penalty of Rs. 7,340 was imposed under Section 221(1) of the Act by his order dated March 7, 1969. The assessee preferred an appeal to the Appellate Assistant Commissioner contending that on account of financial difficulties he could not pay the advance tax in time and as and when he was able to pay he was paying the taxes. While agreeing with the plea of the assessee the Appellate Assistant Commissioner found him technically guilty of default. In that view he reduced the penalty to Rs. 3,660. The assessee then preferred a second appeal to the Appellate Tribunal contending that no penalty can be levied for non-payment of advance tax. Alternatively, it was contended that the penalty levied was excessive. The Appellate Tribunal following its earlier order in another appeal held that no penalty is leviable for non-payment of advance tax under Section 221(1) of the Act and set aside the penalty. Then the Commissioner moved the Tribunal for reference of the question of law raised by him and it has been accordingly referred to this court.

3. The question to be determined is whether the expression 'tax' occurring in Section 221(1) includes 'advance tax'. Mr. Rama Rao, the learned counsel appearing for the revenue, contended that the Tribunal was in error in holding that the term 'tax' occurring in Section 221(1) does not include 'advance tax' and that for that reason the authority empowered to levy penalty under that provision is not mentioned. The Income-tax Officer has no power to levy penalty for failure to pay advance tax within the time allowed. We may, therefore, refer to the relevant provisions. Section 221 reads:

'221. (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under Sub-section (2) of Section 220, be liable to pay by way of penalty, an amount which, in the case of a continuing default, may be increased from time to time, so, however, that the total amount of penalty does not exceed the amount of tax in arrears :

Provided that before levying any such penalty the assessee shall be given a reasonable opportunity of being heard.

(2) Where as a result of any final order the amount of tax, with respect to the default in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the amount of penalty paid shall be refunded.'

4. It is because of the absence of the words 'advance tax' in the section and the use of the word 'tax' the learned counsel for the assessee contended that this provision has no application to a case of default of payment of advance tax. Sub-section (2) of Section 220 to which reference is made in Section 221 is in these terms ;

'If the amount specified in any notice of demand under Section 156 is not paid within the period limited under Sub-section (1), the assessee shall be liable to pay simple interest at four per cent. per annum from the day commencing after the end of the period mentioned in Sub-section (1).'

5. Sub-section (2) speaks of any notice of demand so as to take in every kind of notice issued under Section 156. It is, however, argued that no interest is payable on advance tax as provided under Sub-section (2) of Section 220, but that itself will not determine the question. 'Tax' has been defined in Clause (43) of Section 2 and it reads :

''Tax' in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforsaid date.'

6. The charging provision is Section 4 and it reads :

'4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person :

Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.

(2) In respect of income chargeable under Sub-section (1) income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.'

7. Payment of tax in advance occurs only in the charging provision and 'advance tax' as such. is not defined in the Act. Section 190 provides for tax on income being payable by deduction at source or by advance payment, as the case may be. When under Section 190 the assessee makes payment of advance tax he makes payment of advance tax on the basis of the income of the previous year. Sections 207 - 219 deal with payment of advance tax. Section 207 says that tax shall be payable in advance in accordance with the provisions of Sections 208 - 219 in the case of income other than the income chargeable under the head 'capital gains'. Tax so payable is referred to as 'advance tax'. Conditions of liability to pay and computation of advance tax are detailed in the next two Sections 208 and 209. Credit is given for the advance tax in the assessment made for the assessment year next following the financial year in which the advance tax was payable. If the advance tax is found to be in excels of the tax payable on the completion of the assessment, the assessee will be entitled to refund the excess amount paid. Such refund is provided in Section 237. Section 212 entitles an assessee to estimate his income of the relevant previous year and pay advance tax on the basis of his own estimate and he shall pay tax so estimated by him in equal instalments specified in Section 212. Section 210 says that where a person has been previously assessed by way of regular assessment, the Income-tax Officer may by order in writing require him to pay the advance tax determined in accordance with the provisions of Sections 207, 208 and 209, Section 218 says that if an assessee does not pay on the specified date any instalment of advance tax which he is required to pay under Section 210, he will be deemed to be in default. Section 219 provides for credit being given for advance tax. Even where a provisional assessment is made, credit will be given for the advance tax paid in such provisional assessment. In view of the scheme of the provisions of Sections 207 - 219 it would be difficult to agree with the view of the Tribunal that 'advance tax' is not a tax. The charging provision, Section 4, provides for payment of tax in advance on the basis of the tax assessed for the previous assessment year.

8. The fact that Section 221(1) 'as unamended' did not specify the authority to impose penalty is not significant. In the context and setting of Section 221, the authority contemplated could be no other than the Income-tax Officer. It should not be forgotten that it is the Income-tax Officer under Section 210 who is empowered to require the assessee to pay advance tax on the basis of the previous year's assessment. It should, therefore, be deemed that he is the person competent to impose penaltyalso under Section 221. We are, therefore, of the opinion that Section 221(1) of the Income-tax Act, 1961, applies to default in payment of advance tax. We are supported in our view by the following decisions I Swastik Engineering Works v. Commissioner of Income-tax [1973] 87 ITR 116 , D.C. Puliani v. Commissioner of Income-tax : [1973]89ITR164(All) , Commissioner of Income-tax v. V. Venilal Dwarkadas Mehta : [1974]93ITR140(Orissa) , Smt. Kusum Kumari v. Union of India : [1972]85ITR19(All) and E.K. Varghese v. Income-tax Officer : [1974]96ITR557(Mad) . We, therefore, answer the question in the affirmative and in favour of the revenue. No costs. Advocate's fee Rs. 250.


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