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Commissioner of Income-tax Vs. Mohanlal Gokuldas and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 32 of 1971
Judge
Reported in[1974]95ITR537(AP)
ActsIncome Tax Act, 1961 - Sections 220(6)
AppellantCommissioner of Income-tax
RespondentMohanlal Gokuldas and Co.
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateY.V. Anjaneyulu, Adv.
Excerpt:
.....filed application for grant of time for payment of taxes till disposal of appeals finally by appellate assistant commissioner - application filed under section 220 (6) not under section 220 (3) - notice issued calling assessee to show cause why penalty for non payment not be levied - income tax officer (ito) can grant stay of collection of taxes as per section 220 (6) - ito passed order under section 220 (6) which can be operative only till disposal of appeals - held, ito entitled to impose penalty under section 221(1). - - judged from any angle we are satisfied that the tribunal has taken an erroneous view of the scope and effect of the order passed by the income-tax officer on october 8, 1963, permitting the assessee to pay a sum of rs. indisputably, the assessee as well as.....kondaiah, j.1. at the instance of the commissioner of income-tax, hyderabad, the income-tax appellate tribunal, hyderabad bench, has submitted a statement of case for our opinion under section 256(1) of the income-tax act, ,1961 (hereinafter called 'the act'), on the following question:' whether, on the facts and in the circumstances of the case, and on a true interpretation of the order dated the 8th october, 1963, passed by departmental authorities with reference to the assessee's application dated the 26th of july, 1963, the penalties levied under section 221(1) of the income-tax act, 1961, for the assessment years 1953-54, 1958-59, 1959-60 and 1961-62 were valid '2. in order to appreciate the scope of this question, it is necessary to refer briefly to the material facts that gave rise.....
Judgment:

Kondaiah, J.

1. At the instance of the Commissioner of Income-tax, Hyderabad, the Income-tax Appellate Tribunal, Hyderabad Bench, has submitted a statement of case for our opinion under Section 256(1) of the Income-tax Act, ,1961 (hereinafter called 'the Act'), on the following question:

' Whether, on the facts and in the circumstances of the case, and on a true interpretation of the order dated the 8th October, 1963, passed by departmental authorities with reference to the assessee's application dated the 26th of July, 1963, the penalties levied under Section 221(1) of the Income-tax Act, 1961, for the assessment years 1953-54, 1958-59, 1959-60 and 1961-62 were valid '

2. In order to appreciate the scope of this question, it is necessary to refer briefly to the material facts that gave rise to this question. The assessee is a registered firm carrying on business in hosiery goods. Its assessments for the assessment years 1950-51 to 1961-62 were reopened. The reassessments were completed by the Income-tax Officer on June 6, 1963, resulting in a total demand of tax amounting to Rs. 10,26,276. The demand notices for the years in question were served on the assessee on June 15, 1963. The amounts of tax were payable on or before July 21, 1963. The assessee had preferred appeals against the assessments to the Appellate Assistant Commissioner. After filing the appeals before the Appellate Assistant Commissioner, the assessee filed an application on July 26, 1963, before the Commissioner of Income-tax praying for extension of time to pay the taxes till the appeals filed by the firm ' are finally disposed of'. The Commissioner of Income-tax, by his memo, dated October 5, 1963, directed the assessee to contact the Income-tax Officer for orders on his application. The Income-tax Officer passed the following order on October 8, 1963 :

' (2) You are requested to clarify how the amount of Rs. 1,25,000 was calculated as tax on the incomes admitted by you for the several years.

(3) Without prejudice to the quantum to be arrived at in respect of the above amount, you are permitted to pay Rs. 50,000 by October 20, 1963, and Rs. 75,000 by December 20, 1963, subject to the payment of interest at 4% from the date on which the demands became first payable.

(4) You are requested to offer adequate security by depositing title deeds and executing necessary surety bonds in respect of certain immovable properties you are prepared to offer as security for the balance of tax payable by you.'

3. The assessee had complied with the terms of the order referred to above. The Appellate Assistant Commissioner decided the appeals relating to the assessments in the year 1965, The assessee preferred further appeals to the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner. Pending the, appeals before the Income-tax Appellate Tribunal, the Income-tax Officer issued notices under Section 221(1) of the Act calling upon the assessee to show cause as to why penalty should not be levied on it for the arrears of tax due and payable by it. On receipt of the notices dated October 14, 1965, the assessee, by his letter dated October 31, 1965, informed the Income-tax Officer that it had already paid Rs. 1,25,000 and had also offered adequate security in accordance with the order of the Income-tax Officer and the stay granted to it being until the appeals were finally disposed of, the proceedings for the levy of penalty were requested to be dropped. Rejecting the plea advanced on behalf of the assessee, the Income-tax Officer, by his order dated December 10, 1965, levied penalties of Rs. 2,545, Rs. 18,400, Rs. 17,905 and Rs. 19,770 for the assessment years 1953-54, 1958-59, 1959-60 and 1961-62respectively. Subsequent to the passing of penalty orders by the Income-tax Officer, the appeals before the Income-tax Appellate Tribunal relating to assessments for the years in question had been decided, as a result of which the total tax of Rs. 10,26,276 raised by the Income-tax Officer had been reduced to about Rs. 1,50,000. The Appellate Assistant Commissioner, to whom appeals against the orders of penalty under Section 221(1) were preferred by the assessee, confirmed the liability to pay penalty but reduced the penalties to Rs. 845, Rs. 820, Rs. 900 and Rs. 8,000, respectively. The assessee preferred further appeals to the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal accepted the contention of the assessee that the stay of collection of tax was granted by the Income-tax Officer till the appeals are finally disposed of. The Income-tax Appellate Tribunal has liberally construed the expression ' till the appeals are finally disposed of '. It observed that the expression ' may go to any length, even beyond the decision of the Appellate Tribunal'. In the circumstances, the penalties were held to be unwarranted and unjustified and, consequently, the penalty orders were cancelled and the amounts of penalty were directed to be refunded if they were already paid. Hence, this reference at the request of the Commissioner of Income-tax.

4. Mr. P. Rama Rao, the learned counsel for the income-tax department, contended that the Tribunal has erred in law in interpreting the scope of the order passed by the Income-tax Officer on October 8, 1963, permitting the assessee to pay Rs. 1,25,000 by two instalments of Rs. 50,000 and Rs. 75,000 and to furnish adequate security for the balance of the amount. He further urged that the very scope of the order passed by the Income-tax Officer under Section 220(6) of the Act being only till the disposal of the appeals before the Appellate Assistant Commissioner, any order passed by the Income-tax Officer should be construed to be operative only till the disposal of the appeals before the Appellate Assistant Commissioner. That apart, the expression 'finally disposed of' must be interpreted as finally disposed of by the Appellate Assistant Commissioner and the interpretation as given by the Tribunal, if accepted, would lead to anomalies resulting in great injustice to the revenue.

5. Mr. Anjaneyulu, the learned counsel appearing for the assessee, resisted the claim of the department contending, inter alia, that the Income-tax Officer has ample power and jurisdiction to grant stay of collection of the tax by virtue of the powers vested in him under Sub-section (3) to Section 220 although he can grant stay under Sub-section (6) of Section 220 only till the disposal of the appeals before the Appellate Assistant Commissioner and that the decision of the Tribunal can be supported on the application of the provisions of Section 220(3) of the Act to the instant case.

6. Admittedly, the Income-tax Officer is vested with statutory discretion in a given case to grant stay of collection of tax under Section 220(6) of the Act only till the disposal of the appeals before the Appellate Assistant Commissioner. The scope of the powers vested in the Income-tax Officer has been limited by the very provisions of that section. Hence, any order passed by the Income-tax Officer thereunder cannot be construed to have valid force beyond the disposal of the appeals before the Appellate Assistant Commissioner. The Income-tax Officer is not bound to exercise his discretion in not treating an assessee as a defaulter, after the disposal of the appeals before the Appellate Assistant Commissioner. The view expressed by the Income-tax Appellate Tribunal in construing the order of the Income-tax Officer dated October 8, 1963, must be held to be wrong for reasons more than one.

7. Firstly, the order of the Income-tax Officer which is the material one for construing the rights of the parties arising thereunder does not indicate that the order was effective or would be in force beyond the disposal of the appeals before the Appellate Assistant Commissioner. If nothing is stated in the order, it must be construed to be one which has been passed by the statutory authority within the limits provided under the statute. As pointed out earlier, the Income-tax Officer has jurisdiction to pass an order granting stay of collection of the tax due and payable by an assessee, only till the disposal of the appeals before the Appellate Assistant Commissioner and, therefore, this order has to be construed as only limiting its operation till the disposal of the appeals before the Appellate Assistant Commissioner.

8. Secondly, even the application filed by the assessee before the Commissioner of Income-tax does not specifically indicate that the request for granting time for payment of the taxes was till the disposal of the appeals before the Income-tax Appellate Tribunal. It is pertinent to note that there was no mention of the words 'till the disposal of the appeals by the Appellate Tribunal' in the assessee's application dated July 26, 1963. The Tribunal laid much stress upon the expression 'finally disposed of'. The appeals referred to in the last paragraph of the application of the assessee must be construed to be the appeals preferred by it to the Appellate Assistant Commissioner as referred to earlier in that application. By reading the entire application, we are of the view that the very request of the assessee was for granting of time for payment of the taxes till the disposal of the appeals finally by the Appellate Assistant Commissioner. The words ' finally disposed of ' may be construed as ' finally disposed of by the Appellate Assistant Commissioner '. There may be cases where the Appellate Assistant Commissioner calls for findings or reports from the Income-tax Officer in respect of certain items of assessment. There mayalso be cases where the orders of the Income-tax Officer are set aside and the matters remanded to the Income-tax Officer for further enquiry. The stay granted in such circumstances should be construed to be operative only till the disposal of the appeals by the Appellate Assistant Commissioner finally, but, by no stretch of imagination, it should be interpreted as to be operative till the disposal of the appeals by the Appellate Tribunal finally.

9. Thirdly, no appeals were pending on the date of the application before the Appellate Tribunal. In the circumstances, it is not open to the assessee to contend that stay of collection of tax till the disposal of the appeals finally by the Appellate Tribunal was prayed for at that stage thinking that the appeals preferred by it to the Appellate Assistant Commissioner would be disposed of adversely and further appeals had to be filed by it to the Appellate Tribunal. A careful scrutiny of the entire application and the circumstances under which the application was filed, would indicate that the request of the assessee was only for stay of collection of tax till the final disposal of its appeals before the Appellate Assistant Commissioner. It is not possible to read something into the application to spell out what the assessee contends for. Judged from any angle we are satisfied that the Tribunal has taken an erroneous view of the scope and effect of the order passed by the Income-tax Officer on October 8, 1963, permitting the assessee to pay a sum of Rs. 1,25,000, in two instalments and to furnish security for the balance of the amount. Mr. Anjaneyulu, the learned counsel for the assessee, expressed his inability to support the reasoning of the Tribunal for arriving at the conclusion to allow the appeals.

10. We shall now turn to the submission of Mr. Anjaneyulu that the view taken by the Tribunal can be sustained on the application of the provisions of Sub-section (3) to Section 220 of the Act. This submission is devoid of any merit as the application was not filed by the assessee under that provision. Indisputably, the assessee as well as the departmental authorities proceeded before the Tribunal that the application was only under Section 220(6). As a fact, the assessee did not prefer the application under Sub-section (3) to Section 220. We may add that no question has been referred for our opinion as to whether the application by the assessee was under Section 220(3) or not. Even assuming that the assessee can take the aid of Section 220(3), we are of the firm view that the assessee cannot succeed in this reference. Sub-section (3) to Section 220 empowers the Income-tax Officer to extend the time for payment or permit the payment by instalments on such conditions as he may think fit to impose, taking into consideration the facts and circumstances of the case. This power vested in the Income-tax Officer is without prejudice to the provisions containedin Sub-section (2) whereunder the assessee is liable to pay simple interest at 9% per annum from the day commencing after the end of the period mentioned in Sub-section (1). The order contemplated under Sub-section (3) relates to the extension of time for payment or permission to pay the amount in instalments. The request of the assessee in its application dated July 12, 1963, was not for permission to pay by instalments or for more extension of time for payment, but on the contrary, the request was to give the assessee time for the payment of the tax till the appeals are finally disposed of. In the circumstances, we are of the view that the application was not under Section 220(3), nor the order passed by the Income-tax Officer was under that provision. We have no hesitation to hold that the Income-tax Officer has passed the order dated October 8, 1963, only under Section 220(6) of the Act and the same can be operative only till the disposal of the appeals before the Appellate Assistant Commissioner, and the Income-tax Officer, in the present case, is perfectly entitled to impose penalty under Section 221(1) of the Act for non-payment of the arrears of tax.

11. For all the reasons stated, our answer to the question must be in the affirmative and in favour of the department. If there are any other grounds raised in the appeal by the assessee before the Appellate Tribunal, it is open to the Tribunal to pass appropriate orders in that regard. The assessee shall pay the costs to the Commissioner of Income-tax. Advocate's fee Rs. 250.


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