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M. O. Paily Vs. Addl. Income-tax Officer, I Circle, Trichur, and Another. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberO. P. No. 209 of 1957
Reported in[1959]35ITR488(Ker)
AppellantM. O. Paily
RespondentAddl. Income-tax Officer, I Circle, Trichur, and Another.
Cases ReferredLadhuram Taparia v. B. K. Bagchi
Excerpt:
- - 1,500). 21-2-1956 the petitioner wrote to the inspecting assistant commissioner :for failure to comply with the terms of your order, the concession granted has been canceled and the income-tax officer has imposed a penalty of rs. 100). 8. the above narration of events makes it quite clear that there was no failure to exercise the discretion under section 45 or any mal-exercise thereof which will attract the jurisdiction of this court. 12. section 2 (6d) of the indian income-tax act, 1922, defines 'inspecting assistant commissioner' as follows :inspecting assistant commissioner means a person appointed to be an inspecting assistant commissioner of income-tax under section 5.'counsel for the petitioner and the department are unable to point out any provision of law under which the..........1955, the tax demand of rs. 17,769-4-0 for the year was payable on or before june 30, 1955. the assessee paid only rs. 1,000 on june 30, 1955, and he requested for permission to pay the balance in easy installments. the income-tax officer intimated his inability to grant the request and asked the assessee to pay the balance before july 30, 1955. but no payment was made accordingly. hence the income-tax officer imposed a penalty of rs. 788 on october 22, 1955. later, concessions for clearing off the arrears in installments were granted by the inspecting assistant commissioner of income-tax, ernakulam. but the installments were not kept up. hence penalties of rs. 750, rs. 1,500 and rs. 100 had to be imposed by the income-tax officer on dates january 7, 1956, february 11, 1956, and.....
Judgment:

M. S. MENON, J. - The Petitioner is a member of Messrs. Maveli Lazar Ouseph & Sons, Irinjalakuda, an association of persons, which was directed to pay by way of income-tax a sum of Rs. 17,769-4-0 on or before June 30, 1955, in respect of the assessment year 1953-54 (accounting period : 1124 M. E.). The assessment was by the first respondent, the First Additional Income-tax Officer, First Circle, Trichur, and the assessment order is exhibit P dated May 23, 1955.

2. The Petitioner appealed against the assessment for and on behalf of the said association of persons to the Appellate Assistant Commissioner of Income-tax, Trivandrum. Exhibit P1 is the memorandum of appeal and exhibit P2, the order of the Appellate Assistant Commissioner dated October 23, 1956. The concluding portion of the order reads as follows :

'In the absence of a definite finding on the various contentions raised by the appellants, I have no alternative but to set aside the assessment and direct the Income-tax Officer to re-do the assessment after making necessary investigation on the points mentioned above.'

3. Exhibit P3 dated October 22, 1955, exhibit P4 dated January 7, 1956, exhibit P5 dated February 13, 1956, and exhibit P6 dated September 14, 1956, are four orders passed by the first respondent under section 46 (1) of the Indian Income-tax Act, 1922, which provides that :

'When an assessee is in default in making a payment of income-tax, the Income-tax Officer may in his discretion direct that in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty.'

The Petitioner challenged the correctness of these orders before the Commissioner of Income-tax, Bangalore (second respondent), under section 33A of the Indian Income-tax Act, 1922. The petitions filed by him are exhibits P7, P8, P9 and P10 and the order of the Commissioner on those petitions is exhibit P11 dated January 8, 1957.

4. Exhibit P11 reads as follows :

'These four revision petitions are against the penalties of Rs. 788, Rs. 750, Rs. 1,500 and Rs. 100, levied respectively on dates October 22, 1955, January 7, 1956, February 11, 1956, and September 14, 1956, by I Additional Income-tax Officer, Trichur, for default in payment of the taxes due for assessment year 1953-54.

As per assessment order dated May 23, 1955, the tax demand of Rs. 17,769-4-0 for the year was payable on or before June 30, 1955. The assessee paid only Rs. 1,000 on June 30, 1955, and he requested for permission to pay the balance in easy installments. The Income-tax Officer intimated his inability to grant the request and asked the assessee to pay the balance before July 30, 1955. But no payment was made accordingly. Hence the Income-tax Officer imposed a penalty of Rs. 788 on October 22, 1955. Later, concessions for clearing off the arrears in installments were granted by the Inspecting Assistant Commissioner of Income-tax, Ernakulam. But the installments were not kept up. Hence penalties of Rs. 750, Rs. 1,500 and Rs. 100 had to be imposed by the Income-tax Officer on dates January 7, 1956, February 11, 1956, and September 14, 1956, for assessees default in respect of the part or whole of the demands outstanding on those dates. There were clear defaults on all the occasions on which the penalties were levied.

However, it is seen that a major portion of the assessment was in dispute and on assessees appeal, the Appellate Assistant Commissioner of Income-tax has set aside the assessment and remanded the case for fresh disposal after considering the explanations filed by the assessee regarding the cash credits and after making necessary investigations. Considering the extenuating circumstances of the case, I shall give the assessee some relief. The penalties of Rs. 750 and Rs. 1,500 levied on January 7, 1956, and February 11, 1956, are reduced to Rs. 400 and Rs. 750 respectively. The other two penalties are confirmed.

Revision petitions 257/56-57 and 280/56-57 are rejected and revision petitions 278/56-57 and 279/56-57 are allowed.

5. Section 45 of the Indian Income-tax Act, 1922, (omitting the provisos and the explanation thereto) is in the following terms :

'Any amount specified as payable in a notice of demand under sub-section (3) of section 23A or under section 29 or an order under section 31 or section 33, shall be paid within the time, at the place and to the person mentioned in the notice or order, or if a time is not so mentioned, then on or before the first day of the second month following the date of the service of the notice or order, and any assessee failing so the date of the service of the notice or order, and any assessee failing so to pay shall be deemed to be in default, provided that, when an assessee has presented an appeal under section 30, the Income-tax Officer may in his discretion treat the assessee as not being in default as long as such appeal is undisposed of.'

6. Learned counsel for the Petitioner drew my attention to Ladhuram Taparia v. B. K. Bachi, Lord Krishna Sugar Mills v. Income-tax Officer and Goverdhan Lal Jagadish Kumar v. Commissioner of Income-tax. All these and other relevant decisions have been dealt with by the Andhra High Court in Vetcha Sreeramamurthy v. Income-tax Officer and I consider it unnecessary to go beyond that decision except to point out that Ladhuram Taparia v. B. K. Bagchi has apparently been reversed on appeal. (See the first supplement to Sampath Iyengars Indian Income-tax Act, Fourth Edition, page 227). The decision of the Andhra High Court can be summed up on the words of the head note, as follows :

'The discretionary power conferred by section 45 of the Income-tax Act on the Income-tax Officer is coupled with a duty to exercise his discretion when the facts calling for its exercise exist. The fact that the exercise of the power is left to the discretion of the Officer does not exonerate him from discharging his duty.

If the Income-tax Officer refuses to exercise any discretion at all, or his discretion is exercised arbitrarily, capriciously or unreasonably or by taking into consideration extraneous and irrelevant considerations, the court can compel the Officer to discharge his duty, that is, to exercise his discretion honestly and objectively.'

7. The sequence of events subsequent to the order of assessment, exhibit P (May 23, 1956) and prior to exhibit P6 (September 14, 1956), the last of the four orders under section 46 (1), can be sketched as follows :

27-6-1955

The petitions paid Rs. 1,000 and prayed : 'I may be allowed to pay balance amount in easy installments.'

30-6-1955

The 1st respondent wrote to the Petitioner that his request to pay the balance in installments cannot be allowed and that the balance should be paid on or before 30-7-1955.

22-10-1955

P3 (Penalty : Rs. 788).

4-11-1955

On a request from the Petitioner to stay collection of the tax the Inspecting Assistant Commissioner ordered : 'The balance of tax should be paid as follows :

(1) Rs. 1,500 at once.

(2) Rs. 2,500 by 26-11-1955.

(3) Rs. 2,500 by 25-12-1955.

(4) Rs. 3,500 on 15-1-1956.

(5) Rs. 3,500 on 15-2-1956 and the balance on 15-3-1956.

Interest will be collected in respect of deferred payments.'

18-11-1955

The Petitioner paid Rs. 1,500.

7-1-1956

P4 (Penalty : Rs. 750).

9-1-1956

The 1st respondent wrote to the Inspecting Assistant Commissioner as follows :

'The assessee has not paid the installments of Rs. 2,500 each on 26-11-1955 and 25-12-1955 granted to him as per the Inspecting Assistant Commissioners letter referred to above. I have imposed a penalty of Rs. 750 on him on 7-1-1955 for the default to pay the installments in time. I may also be informed whether the entire demand can be considered to be in arrears or only the installment due on 26-11-1955 and 25-12-1955.'

20-1-1956

The Petitioner paid Rs. 1,500.

24-1-1956

The Inspecting Assistant Commissioner wrote to the Petitioner :

'Since you have not paid the 2nd and 3rd installments according to my order dated 4-11-1955, the concession stands automatically canceled and the entire arrears became payable in full when the default occurred.'

13-2-1956

P5 (Penalty Rs. 1,500).

21-2-1956

The Petitioner wrote to the Inspecting Assistant Commissioner :

'For failure to comply with the terms of your order, the concession granted has been canceled and the Income-tax Officer has imposed a penalty of Rs. 3,038 as per his three 22-10-1955, 7-1-1956 and 13-2-1956.' and requested him :

'to stay the collection of the balance tax till the disposal of the pending appeal.'

1-3-1956

The Inspecting Assistant Commissioner replied : 'Without prejudice to penalties imposed under section 46(1) you are permitted to pay Rs. 3,500 in two equal installments on 10-3-1956 and 25-3-1956. The balance of tax is stayed till 15-7-1956.'

12-3-1956

The Petitioner paid Rs. 1,750.

23-3-1956

The Petitioner paid Rs. 1,750.

18-7-1956

The Inspecting Assistant Commissioner wrote to the Petitioner :

'The appeal was filed in July 1955 and it is not possible to grant time till disposal of appeal. The balance of tax should be paid in installments of Rs. 2,000 beginning from

30-8-1956.

This is without prejudice to the demands due for subsequent years which should be paid on the due dates.'

14-9-1956

P6 (Penalty : Rs. 100).

8. The above narration of events makes it quite clear that there was no failure to exercise the discretion under section 45 or any mal-exercise thereof which will attract the jurisdiction of this court.

9. Counsel for the Petitioner submitted that the orders of the first respondent under section 46 (1) after he became aware of the filing of the appeal cannot be sustained. The filing of an appeal is already indicated does not operate as a stay of collection and I am not prepared to say that section 45 demands anything more than the exercise of a discretion on the part of the Income-tax Officer as to whether he should treat an assessee as a defaulter or not when his jurisdiction under the section is invoked in a given case.

10. The only other argument urged on behalf of the Petitioner was that exhibit P11 was subsequent to the cancellation of the assessment by exhibit P2 and that the Commissioner was hence wrong in not holding that exhibits P3, P4, P5 and P6 were unsustainable and that the revision petitions should be allowed.

11. I cannot agree. The Commissioner should evaluate - as he has done - the correctness or otherwise if exhibits P3, P4, P5 and P6 as on the date of those orders and not in the light of subsequent events.

12. Section 2 (6D) of the Indian Income-tax Act, 1922, defines 'Inspecting Assistant Commissioner' as follows :

'Inspecting Assistant Commissioner means a person appointed to be an Inspecting Assistant Commissioner of Income-tax under section 5.'

Counsel for the Petitioner and the Department are unable to point out any provision of law under which the Inspecting Assistant Commissioner can issue orders like those he has given on November 4, 1955, and March 1, 1956. As no controversy has been raised before me regarding his powers or action I have not death with that question in this judgment.

13. The petition fails and is hereby dismissed. No costs.

Petition dismissed.


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