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M.R. Vidyasagar Vs. Income-tax Officer, Circle Ii, Madurai and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petn. Nos. 743 and 748 of 1954
Judge
Reported inAIR1957Mad250
ActsIncome-tax Act, 1922 - Sections 18A(6) and 24B; Income-tax Rules - Rule 48
AppellantM.R. Vidyasagar
Respondentincome-tax Officer, Circle Ii, Madurai and anr.
Appellant AdvocateK. Srinivasan and ;K. Narayanaswami, Advs.
Respondent AdvocateC.S. Rama Rao Sahib, Adv.
DispositionPetitions allowed
Excerpt:
direct taxation - assessment - sections 18a (6) and 24b of income-tax act, 1922 and rule 48 of income-tax rules - whether petitioner liable to pay interest - petitioner contended that income-tax officer and investigating assistant commissioner failed to exercise discretion vested in them by rule 48 - rule 48 prescribes cases and circumstances in which income tax officer could exercises power to waive or reduce interest - failure to exercise power given by rule 48 has vitiated levy of interest by income-tax officer in each assessment year and also vitiated exercise of power vested in inspecting assistant commissioner - petition allowed. - - the petitioner therefore requested the first respondent (income-tax officer) .that the levy of penal interest .was clearly illegal .and invited.....rajagopalan, j.1. these petitions arose out of proceedings under the income-tax act for the assessment years 1946-47 and 1948-49; the corresponding account years ended respectively with 31-3-1946 and 31-3-1948. the assesses was a hindu undivided family, of which m. k. ramaswami aiyar was the kartha. he died on 4-6-1949. the petitioner is the present kartha of that family.2. ramaswami aiyar, as the kartha of his undivided hindu family, was a partner of the madura knitting company, and the share of profits derived from this business constituted the principal source of income of this undivided family. the assessment of the assessee could therefore be completed only after his share of the profits of the company had been ascertained. further, when the assessment of the company was revised on.....
Judgment:

Rajagopalan, J.

1. These petitions arose out of proceedings under the Income-tax Act for the assessment years 1946-47 and 1948-49; the corresponding account years ended respectively with 31-3-1946 and 31-3-1948. The assesses was a Hindu undivided family, of which M. K. Ramaswami Aiyar was the kartha. He died On 4-6-1949. The petitioner is the present kartha of that family.

2. Ramaswami Aiyar, as the Kartha of his undivided Hindu family, was a partner of the Madura Knitting Company, and the share of profits derived from this business constituted the principal source of income of this undivided family. The assessment of the assessee could therefore be completed only after his share of the profits of the company had been ascertained. Further, when the assessment of the company was revised on appeal or on a reference under Section 66(1) of the Act, the share of the assessee would become liable to a corresponding revision.

3. The assessee became liable to pay tax in advance under the provisions of Section 18-A of the Act, notices having been issued' to him under Sub-section 1 of Section 1S-A in each of the years with which we are concerned in these proceedings, Ramaswami Aiyar purported to avail himself of the right conferred on an assessee by Sub-section 2 of Section 18-A. With reference to the. assessment year 1946-47 he lodged a revised estimate of his income on 15-3-1946.

It was mistakenly assumed at one stage that it was only lodged on 20-3-1946. He estimated the income for the relevant account year at Rs. 45,000. For the assessment year 1948-49 he estimated his income, again at Rs. 45,000. That estimate was furnished on 15-3-1948. The actual income on which the assessee was finally assessed in each of the assessment years exceeded these estimates by very much more than the tolerance permitted by Sub-section 6 of Section 18-A, the difference being much more pronounced in the assessment year 1948-49 than in 1946-47. The assessee, therefore, became liable to pay interest under the provisions of Sub-section 6 of Section 18-A.

4. The assessment of the assessee for 1946-47 was completed by the Income-tax Officer on 28-11-1950, and that for 1948-49 on 28-2-1951, both the assessments being completed after the death of Ramaswami Aiyar. Por both the years, the sum demanded included the interest due to the State under Sub-section 8 of Section 18-A. The assessable income of the Madura Knitting Company underwent alteration by way of reduction when appeals for the assessment were disposed of by the Tribunal, and as a necessary consequence the assessable income of the assessee also was revised.

Acting under the powers contained in the third proviso to Section 18-A (6), the claim under the head 'interest' under Sub-section 6 was also revised by the Income-tax Officer, and a fresh demand was made therefor on 12-4-1954. Apparently, the petitioner had meanwhile applied to the Income-tax Officer himself to cancel the levy of interest under Section 18-A(6). The averment in paragraph 7 of the affidavit filed by the petitioner in W. P. No. 743 of 1954 was;

'The petitioner therefore requested the first respondent (Income-tax officer) ..... that the levy of penal interest ..... was clearly illegal .... and Invited him to cancel the same under the powers vested in him under the rules. On the refusal of the first respondent to this request, the petitioner filed a petition on 10-4-1954 to the Inspecting Assistant Commissioner ..... to cancel the levy of penal interest under the powers vested in him under Rule 20 of the Indian Income-tax Act.'

The truth of the claim of the petitioner, that ho had moved the Income-tax Officer in the first instance to cancel the levy of 'penal' interest, was not challenged by the respondent. The date, 10-4-1954, would, however, appear to be wrong. It was on 14-4-1954 that the petitioner applied to the Inspecting Assistant Commissioner to direct a cancellation of the levy of interest. That application failed. The Central Board of Revenue declined to interfere.

5. The petitioner applied under Article 228 of the Constitution for the issue of writs of certiorari, to set aside the orders of the Income-tax Officer levying interest under Section 18-A(6) in each of the two years. W. P. No. 743 of 1954 related to the assessment year 1948-49, and W. P. No. 748 of 1954 related to the assessment year 1946-47.

6. We shall first set out the relevant portions of Section 18-A of the Act. The relevant portion of Sub- Section 1(a) of Section 18-A runs:

'In case the income in respect of which provision is not made under Section 18 for deduction of income-tax at the time of payment, the Income-tax Officer may, on or after the 1st day of April in any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government on the 15th day of June, 15th day of September, 15th day of December and 15th day of March in that year, respectively, an amount equal to one-quarter of the income-tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed.....'

(the rest of Clause (a) of Sub-section 1 with its provisos and Clause (b) of Sub-section 1 are omitted)

7. Sub-section 2 of Section 18-A runs:

'If any assessee who is required to pay tax by an order under Sub-section (1) estimates at any time before the last instalment is due/that the part of his income to which that sub-section applies for the period which would be the previous year for an assessment for the year next following is less than the income on which he is required to pay tax and accordingly wishes to pay an amount less than the amount which he is so required to pay, he may send to the Income-tax Officer an estimate of the tax payable by him calculated in the manner laid down in Sub-section (I) on that part of his income for such period, and shall pay such amount as accords with his estimate in equal instalments on such of the dates specified in Sub-section (1) (a) as have not expired or in one sum if only the last of such dates has not expired.

Provided that the assesses may send a revised estimate of the tax payable by him before any one of the dates specified in Sub-section (1) (a) and adjust any excess or deficiency in respect of any instalment already paid in a subsequent instalment or in subsequent instalments.'

8. The relevant portion of Sub-section 6 of Section 18-A runs:

'Where in any year an assessee has paid tax under Sub-section (2) ..... on the basis of his own estimate, and the tax so paid is less than eighty per cent of the tax determined on the basis of the regular assessment, so far as such tax relates to income to which the provisions of Section 18 do not apply and so far as it is not due to variations in the rates of tax made by the Finance Act enacted for the year for which fee regular assessment is made, simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in which the tax was paid up to the date of fee said regular assessment shall be payable by fee assessee upon fee amount by which fee tax so paid falls short of the said eighty per cent; .....

Provided further that in such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive fee interest payable by fee assessee.'

9. This proviso was enacted by Act XXV of 1953, which directed feat effect should be given to the proviso from 1-4-1952. The assessments, in this case it should be remembered, were completed on 28-11-1950 and 28-2-1951 before fee proviso referred to above was made part of fee Act. But then, it should also be remembered that the figures were revised and a fresh demand made on 12-4-1954, on which date fee proviso was in force.

10. It may be desirable also to set out at thisstage fee provisions of Sub-section 10 (a) of Section 18-A whichruns:

'If any assessee does not pay On the specified dates any instalment of tax that he is required to pay under Sub-section (1) and does not, before fee date on which any such instalment as is not paid becomes due, send under Sub-section 2 an estimate or a revised estimate of fee tax payable by him, he shall be deemed to be an assessee in default in respect of such instalment or instalments.'

We shall set out later the provisions of Rule 48 of fee Income-tax Rules, prescribing the cases and fee circumstances under which an Income-tax Officer could reduce or waive fee interest payable by an assessee under the provisions of Section 18-A(6). Those rules regulated the exercise of the discretion vested in fee Income-tax Officer by the last proviso to Section 18-A{6).

11. The first contention of the learned counsel for the petitioner was, that in fee circumstances of this case fee Income-tax Officer had no jurisdiction at all to levy any interest under Sub-section 6 of Section 18-A. The learned counsel for fee petitioner pointed out that, in each of fee two assessment years, notice under Sub-section 1 of Section 18-A was issued to Ramaswami Aiyar. It was Ramaswami Aiyar feat filed fee estimates of his income on 15-3-1946 and 15-3-1948. It was after his death, which was on 4-6-1949, feat fee assessments were completed. By then the petitioner was fee kartha of fee family.

The Income-tax Officer purported to complete fee assessment under the enabling provisions of Section 24-B. The contention of the learned counsel for fee petitioner was that neither the provisions of Section 18-A nor of Section 24-B empowered the Income-tax Officer, as the assessing authority, to demand of fee legal representative of fee deceased Ramaswami Aiyar what could have been demanded of Ramaswami Aiyar as interest, had he been alive.

12. The learned counsel for fee petitioner urged that the provision for imposing a liability on the assessee to pay interest in Sub-section 8 of Section 18-A of the Act was penal in its scope, as fee liability arose only on a default committed by fee assessee. The further contention was, that neither Sub-section 6 of Section 18-A nor feat Sub-section read with Section 24-B clothed an Income-tax Officer with any jurisdiction to impose a vicarious penalty. In the present case, he pleaded, it was fee sins of fee father Ramaswami Aiyar feat were sought to be visited on his son, fee petitioner.

That was not permissible under Section 18-A(6), was fee submission of fee learned counsel. It is true that fee interest, for fee payment of which by the assessee provision was made by Section 18-A of fee Act, is popularly known as penal interest. That expression appears to have the sanction of fee usage of the department. In fee assessment orders served upon the petitioner, fee interest payable 'under Section 18-A was specifically deferred to as 'penal interest'.

It is not however the popular conception or even fee departmental conception of fee nature of fee liability imposed by Section 18-A on an assessee feat concludes fee determination of fee real nature of that liability. In our opinion this liability for interest is just a statutory liability. We are unable to see anything either in fee language or in fee scope of Sub-section 6 of Section 18-A to indicate that fee liability of fee assessee to pay interest constitutes a penalty. Section 18-A also imposes a liability on the Government to pay interest in fee circumstances specified in the section.

That obviously cannot be viewed as a statutory penalty imposed on fee Government. Though fee liability to pay interest is occasioned by some default of the assessee, either the failure to pay fee instalments due on the due dates, or an under-estimate of fee income beyond the permitted margin when fee provisions of Sub-section 2 of Section 18-A are availed of by fee assessee, feat does not necessarily establish that fee liability to pay interest is a penalty.

No doubt Section 18-A provides for the payment of income-tax in advance. Nonetheless it should be clear that fee liability of fee assessee to pay interest, which Section 18-A created, is based on the principle, feat monies lawfully due to fee Government were withheld by fee assessee, in other words in its essence it is compensatory.

If more than what was lawfully due to fee Government was collected from fee assessee, a liability is plated on the Government to pay interest On feat excess. Thus there appears to be no basis at all for viewing fee statutory liability to pay interest, even limited in its application to an assessee, as a statutory penalty for which the Act provided. The scheme of fee Income-tax Act, it should be remembered marks out the difference between a tax, penalty and interest. Section 29 of the Act is one example of such a distinction. Section 47 is another.

13. The learned counsel for the petitioner referred to an earlier decision of ours in Hariram Sait y. Income-tax Commissioner : [1955]28ITR231(Mad) (A), in support of his contention, that in the absence of a specific provision for the imposition of a vicarious penalty, what could have been demanded of Ramaswami Aiyar could not be demanded of his legal representative subsequent to Ramaswami Aiyar's death. As we have pointed out earlier, the interest, for the payment of which by the assessee Sub-section 6 of Section 18-A provided, is not a penalty, analogous for example to the penalties prescribed by Section 28 of the Act. There is therefore no scope for invoking in this case the principle laid down in : [1955]28ITR231(Mad) (A).

14. The next contention of the learned counsel for the petitioner was that, even if the liability to pay interest under Section 18A (6) was not one to suffer a statutory penalty, that liability, in the absence of any specific provision to the contrary, could not be imposed on the legal representative of the deceased assessee who had been liable to pay that interest. He urged that Section 18-A provided a complete Code in itself. The further plea was that Section 24-B would not apply at all to the levy of interest under Section 18-A (6). It may not be necessary to express our opinion on the question, whether, where an assessee, assessed in his status as an individual, dies after the liability to pay interest tinder Section 18-A (6) accrued, Section 24-B of the Act could be invoked to levy the interest under Section 18-A (6) as part of the assessment proceedings completed under Section 24-B, The argument of the learned counsel for the petitioner was, that in the case of the assessee, the assessment could have been completed after the death of Ramaswami Aiyar only under Sec, 24-B of the Act.

It is true the assessment Orders showed that the Income-tax Officer had purported to apply the provisions of Section 24-B in completing the assessment. That, however, does not really affect the question at issue. The assessee in the present case was a Hindu undivided family. Of that family Ramaswami Aiyar was the kartha in the two assessment years in question. That Ramaswami Aiyar was liable to assessment only in the status of a Hindu undivided family was not in dispute at any time. When the assessments were completed after the death of Ramaswami Aiyar, the family continued to be undivided; only there was a change in the kartha. The petitioner became the kartha. Where a Hindu undivided family is the assessee, we see no scope for applying the provisions of Section 24-B of the Act. A Hindu undivided family continues to exist as one of the legal entities or units recognised and specifically provided for by the Income-tax Act, despite changes in its composition including the change in its kartha, by death or otherwise.

The liability imposed by Sub-section 6 of Section 18-A is on the assessee. The assessee in the present case was a Hindu undivided family. That Ramaswami Aiyar ceased to be the kartha on his death did not affect the continuance of that Hindu undivided family, which was the assessee throughout. Nor did the fact, that the petitioner became the kartha of that family, alter the position; the Hindu undivided family was still the assessee. The Income-tax Officer had jurisdiction to deal with that assessee, the Hindu undivided family, represented, no doubt, after the death of Ramaswami Aiyar, by the petitioner. The contention of the learned counsel for the petitioner was, that the petitioner in relation to the Hindu undivided family, of which he became the kartha on the death of his father Ramaswami Aiyar must be treated as the legal representative of Ramaswami for purposes of Section 24-B. This, however, is impossible. Hamaswami Aiyar was not the assessee, but it was the Hindu undivided family which was represented by Ramaswami Aiyar as kartha that was the assessee.

15. In this connection the learned counsel for the petitioner invited our attention to decisions, where a succeeding manager of a Hindu joint family has been held to be the legal representative of the deceased manager under Section 2(11) C. P. Code. In Our judgment these decisions are wholly irrelevant for considering the scope of Section 24-B of the Income-tax Act. The Civil Procedure Code does not treat a Joint Hindu family as a juristic unit capable of instituting or defending a suit. When a manager is a party to an action, he is a party as an individual, though by reason of the substantive personal law applicable to him, a decree obtained by or against him is also binding on the other members of his family. That is why, when during the pendency of a suit there is disruption in the family, a decree obtained against the manager has been held not to be binding On the other members, for after he loses his representative character, though he continues in the suit, he thereafter represents only himself, a result achieved by the substantive law which the parties are governed. The Income-tax Act, however, treats a Hindu undivided family as a unit, and that is that entity whose income is the subject of assessment. Being merely a legal entity it has to be represented by a human agency, and the person who, by the substantive law applicable to him, is entitled to represent this entity, deals on its behalf; and this is recognised by the Department. This however should not cloud the issue as to the identity of the assessee, which is not the manager for the time being but the undivided family. When, for instance, during the course of the assessment proceedings there is a change in the managership and this need not necessarily be brought about by the death of one kartha, for he might relinquish the managership and be succeeded by another member of the family -- there is no question of the succeeding manager tracing his managership through his predecessor, or being the legal representative of the ex-manager.

If the analogy of the Civil Procedure Code has to be invoked, the case of the Hindu undivided family under the Income-tax Act is more akin to a trust represented by the trustee for the time being. In this illustration, when a trustee who represents the trust which is a party to an action ceases to hold the office by death, resignation or removal, the succeeding trustee, when he. comes on record, does so not as the legal representative of the previous trustee, but under Order XXII, Rule 10 C. P. Code as on a devolution of interest

It is that analogy and that ratio that seems to us to be apposite to the case, and we cannot accede to the proposition, that in the assessment of a Hindu undivided family, the death or resignation of a manager is on a par with the death of an individual assassee as to attract Section 24-B of the Act. The fact, that the Income-tax Act refused to regard a mere severance of status in a Hindu undivided family as putting an end to a joint family, might not fit in exactly with the general Hindu law conception of non-division. But this feature is not relevant to the present discussion, and throws no light on the proper interpretation of Section 24-B of the Act.

16. In our opinion the Income-tax Officer had jurisdiction to levy interest that had accrued due during Ramaswami Aiyar's lifetime even after his death, when the petitioner represented the assessee family as its kartha, provided of course, the requirements of Section 18-A(6) were satisfied.

17. The next contention of the learned counsel for the petitioner was that the Income-tax Officer and the Investigating Assistant Commissioner failed to exercise the discretion vested in them by Rule 48 of the Income-tax rules. It was really a case of failure to exercise jurisdiction, was the plea of the learned counsel for the petitioner. The last proviso to Sub-section 6 of Section 18-A, it should be remembered, runs:

'Provided further that in such cases and in such circumstances, as may be prescribed, the Income-tax Officer may reduce or waive interest payable by the assessee.'

Rule 48 of the Income-tax rules is one of the rules ''prescribed' within the meaning of the proviso. Rule 48 runs:

'The Income tax Officer may reduce or waive interest payable under Section 18-A in the cases and under the circumstances mentioned below, namely,

1. Where the relevant assessment is completed more than one year after the submission of the return . the delay in assessment not being attributable to the assessee;

2. Where a person is under Section 43 deemed to be an agent of any person and is assessed upon the latter's income;

3. Where the assessee has income from an unregistered firm to which the provisions of Clause (b) of Sub-section 5 of Section 23 are applied;

4. Where the previous year is the financial year or any year ending near about the close of the financial year and large profits are made after 15th of March in circumstances which could not be foreseen;

5. Any case in which the Inspecting Assistant Commissioner considers that the circumstances are such that reduction or waiver of interest payable under Section 18-A(6) is justified.'

18. The learned counsel for the respondent urged that the last proviso to Sub-section 6 of Section 18-A, enacted in 1953 but with effect from 1st April 1952, could not apply to an, assessment completed before 1st April 1952. The assessment for 1946-47 was completed on 28th November 1950, and that for 1948-49 was completed on 28th February 1951. The learned counsel for the petitioner pointed out that the assessment to interest claimed under Sub-section 6 was finalised only On 12th April 1954, before which date the petitioner applied to the Income-tax Officer to exercise his discretion to waive any interest the assessee had become liable to pay 'under Sub-section 6 of Section 18-A, The application to the Inspecting Assistant Commissioner was even later.

19. We are unable to accept the contention of the learned counsel for the respondent, that the statutory power conferred by the last proviso to Sub-section 6 could be exercised only before the In-come-tax Officer completes the assessment for a given assessment year. The proviso does not confer any statutory right on an assessee to a remission, in full or in part, of the interest payable under the terms of Sub-section 6. Even independent of the proviso, the right of the Government to remit in full or in part any tax or Other sum that has lawfully accrued due cannot be denied. That however is not a statutory power. Though a statutory power is given to the Income-tax Officer by the last proviso to Sub-section 6, to waive or to reduce the quantified interest payable by the assessee under Sub-sea 6, in its essence it is a delegated authority to grant remission conferred by the Act on the Income-tax Officer.

The discretion to exercise that power is further regulated by Rule 48 of the Income-tax rules. The exercise of that discretion is subject to review in the appropriate forum. The exercise of that discretion must obviously be judicious and at least quasi judicial. It is certainly not an arbitrary power that the last proviso to Sub-section 6 confers on the Income-tax Officer. It is against this background that we have to consider whether the Income-tax Officer has any jurisdiction to exercise the statutory discretion, to waive or to reduce the interest, after he has completed the assessment proceedings in a given assessment year.

20. In our opinion, neither in express terms nor by necessary intendment does the proviso limit the time within which the Income-tax Officer could exercise the statutory power. Nor does Rule 48 prescribe any time limit. Though it may not be quite relevant, it should be remembered that it was not on the express ground, that the assessments had already been completed, that the Income-tax Officer and the Inspecting Assistant Commissioner after him declined to grant relief to the petitioner, the relief which ho prayed for. Far from even Rule 48 prescribing by necessary intendment that the power to waive or reduce interest should be exercised before the Income-tax Officer completes the assessment, in our opinion, Clause 5 of Rule 48 by necessary intendment provides for the exercise of that power even after the Income-tax Officer has completed the assessment.

21. The statutory power to waive or reduce interest is given by the last proviso to Sub-section 6 of Section 18-A only to the Income-tax Officer. But that power has to be exercised in the cases and circumstances prescribed, that is, prescribed by the rules. Rule 48 prescribes the cases and the circumstances in which the Income-tax-Officer could exercise that power. One such circumstance is that for which Clause 5 of Rule 48 provides.

22. Clauses 1 to 4 of Rule 48 cover cases in which the Income-tax Officer could exercise his power, even if there are no orders of the Inspecting Assistant Commissioner. Clause 5 of Rule 48 empowers in effect the Inspecting Assistant Commissioner to give directions to the Income-tax Officer in any case. The expression 'in any case' would also include cases for which specific provision is made in Clauses 1 to 4 of Rule 48. Let as take an illustrative example. An assessee applies to an Income-tax Officer, to waive the interest on the ground specified in Clause 1. The Income-tax Officer refuses to waive the interest. It is open to the Inspecting Assistant Commissioner, with or without an application, from the assessee, to give directions to the Income-tax Officer even in such a case that the interest due from the assessee should be waived. That, in our opinion, is the true scope of Clause 5 of Rule 48.

The power can. On the language of Rule 48(5), be exercised even after the assessment is completes. The; power vested in the Income-tax Assistant Commissioner to control the exercise of the discretion entrusted by the Act to the Income-tax Officer could not have been intended to be defeated by the Income-tax Officer completing the assessment before the Inspecting Assistant Commission has even had an opportunity to decide whether he should exercise the power vested in him by Clause 5 of Rule 48. In the normal course there must be an interval of time between the refusal of the Income-tax Officer and the consideration of the question by the Inspecting Assistant Commissioner. No provision is made in the rules expressly or by necessary intendment that the Income-tax Officer should hold up the final assessment to enable the Inspecting Assistant Commissioner to decide whether he should exercise the power vested in him by Clause 5. Clause 5 would normally come into play only after the Income-tax Officer has completed the assessment.

In our opinion, Clause 5 of Rule 48 is a clear indication, that the statutory power vested in the Income-tax Officer by the last proviso by Sub-section 6 of Section 18-A the exercise of which is regulated by Rule 48, could be exercised by the Income-tax Officer even after the completion of the assessment, whether suo motu or on the application of the assessee. The absence of any prescribed time factor would also apply to the exercise of the power vested in the Inspecting Assistant Commissioner by Clause 5 of Rule 48.

23. If the completion of assessment by the Income-tax Officer was no bar to waive or reduce the interest that had accrued due under Sub-section 6 of Section 18-A when the quantum of that interest was revised by the Income-tax Officer on 12th April 1954, there was certainly occasion even then to consider the request of the assessee, that the interest should be ,waived. Obviously the petitioner could claim that the requirements of Clause 1 of Rule 48 had been satisfied. Still it was a question of discretion, the discretion of the Income-tax Officer. That discretion was not really exercised by the Income-tax Officer in this case. Nor did the Inspecting Assistant Commissioner really consider whether the requirements of Clause 1 of Rule 48 had been satisfied, whether the discretion was properly exercised by the Income-tax Officer and whether it was really a case where the power to issue directions vested in the Inspecting Assistant Commissioner by Clause 5 should be exercised. That, in our opinion, vitiated the levy of interest by the Income-tax Officer in each of the assessment years in question, and it also vitiated the exercise of the power vested in the Inspecting Assistant Commissioner by Clause 5 of Rule 48.

24. It is on this ground that we direct that the rule nisi issued in each of these petitions be confirmed. The petitions will be allowed. That in effect means that the Income-tax Officer will have to go again into the question and decide whether the petitioner has made out a case for the exercise of the discretion vested in the Income-tax Officer to waive or reduce the interest, in exercise of the power vested in him by the last proviso to Sub- Section 6 of Section 18-A. It is only if the Income-tax Officer refuses to exercise his discretion in favour of the assessee, that the question of the petitioner, as an assessee, approaching the Inspecting Assistant Commissioner under Clause 5 of Rule 48 could arise. The petitioner, if so advised, may apply to the Income-tax Officer afresh for waiver or reduction of interest under the terms of the proviso to Sub-section 6 of Section 18-A and Rule 48.

25. There will, however, be no order as tocosts.


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