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Commissioner of Income-tax Vs. Rameshwarlal Agarwalla - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 61 of 1972
Judge
Reported in[1983]141ITR255(Cal)
ActsIndian Income Tax Act, 1922 - Sections 30(1) and 46(1); ;Income Tax Act, 1961 - Section 221
AppellantCommissioner of Income-tax
RespondentRameshwarlal Agarwalla
Appellant AdvocateAjit Sengupta, Adv.
Respondent AdvocateA.K. Roy Chowdhury, Adv.
Cases ReferredJain Brothers v. Union of India
Excerpt:
- .....department then filed appeals. it was argued on its behalf that the aac should have rejected the assessee's appeals as the assessee did not pay the relevant taxes before the filing of those appeals.5. the tribunal, however, opined that the ito had passed those orders under section 221 of the i.t, act, 1961, and not under section 46(1) of the indian i.t. act, 1922, and, therefore, the aac was competent to hear those appeals although the assessee did not pay the relevant taxes before the filing of those appeals before him. in that view of the matter the tribunal rejected the appeals filed by the department.6. mr. ajit sengupta, learned counsel for the revenue, cites the case of b.d. khaitan v. ito : [1978]113itr556(cal) and argues that penalty is a measure to ensure that taxes are paid.....
Judgment:

Deb, J.

1. In this reference under Section 66(1) of the Indian I.T. Act, 1922, we are concerned with the following questions of law :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the penalties as having been imposed under Section 221 of the Income-tax Act, 1961, and not under Section 46(1) of the Indian Income-tax Act, 1922 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Appellate Assistant Commissioner was competent to hear the appeals though the assessee had not paid the relevant taxes before the filing of the appeals before him '

2. The facts stated by the Tribunal may now be stated by us. The assessee is an individual. He did not pay income-tax for the assessment years 1948-49, 1949-50 and 1950-51. The assessments for the aforesaid years were completed long before the 1st April, 1962. The ITO, therefore, issued notices under Section 46(1) of the Indian I.T. Act, 1922, to the assessee to show cause why penalties should not be imposed on him. The assessee did not show any cause. The ITO, therefore, imposed penalties under Section 46(1) of the Indian I.T. Act, 1922.

3. The assessee filed appeals before the AAC without paying the relevant taxes. The AAC reduced the penalties for the aforesaid three years.

4. The Department then filed appeals. It was argued on its behalf that the AAC should have rejected the assessee's appeals as the assessee did not pay the relevant taxes before the filing of those appeals.

5. The Tribunal, however, opined that the ITO had passed those orders under Section 221 of the I.T, Act, 1961, and not under Section 46(1) of the Indian I.T. Act, 1922, and, therefore, the AAC was competent to hear those appeals although the assessee did not pay the relevant taxes before the filing of those appeals before him. In that view of the matter the Tribunal rejected the appeals filed by the Department.

6. Mr. Ajit Sengupta, learned counsel for the Revenue, cites the case of B.D. Khaitan v. ITO : [1978]113ITR556(Cal) and argues that penalty is a measure to ensure that taxes are paid in time and it is not a proceeding for recovery of the taxes and, therefore, the Tribunal was wrong in holding that the aforesaid orders were passed by the ITO under Section 221 of the 1961 Act and not under Section 46(1) of 1922 Act. Mr. Sengupta further argues that the Tribunal was also wrong in holding that the AAC was competent to hear those appeals.

7. Mr. A.K. Roy Chowdhury, learned counsel for the assessee, disputes the aforesaid arguments and argues that the Act of 1922 does not apply in this case in view of Section 297(2), Clause (g), read with Clause (j) of that section, of the I.T. Act, 1961. He further argues that an answer to the aforesaid questions should be given in favour of the assessee in view of the judgment of the Supreme Court in the case of Jain Brothers v. Union of India : [1970]77ITR107(SC) , and also in view of an earlier judgment of the Supreme Court in the case of Third ITO v. Damodar Bhat : [1969]71ITR806(SC) .

8. We are, however, not impressed by the arguments of Mr. Roy Chowdhury.

9. In the case of Jain Brothers the Supreme Court, after considering its earlier judgment in Damodar Bhat's case, has held that the proceedings for imposition of penalty have to be initiated under the Act of 1922 in respect of any assessment completed before the 1st April, 1962, and that the penalty may be imposed under that Act. The Supreme Court further held that any proceeding for the imposition of penalty in respect of any assessment year ending on the 31st March, 1962, or for an earlier year which is completed on or after the 1st April, 1962, has to be initiated under the Act of 1961 and that the penalty may be imposed under that Act. The Supreme Court also held that there was every justification for providing in Clauses (f) and (g) of Section 297(2) of the I.T. Act, 1961, that the date of completion of the assessment would be determinative of the enactment under which the proceedings for penalty should be held.

10. Section 46(1) of the Indian I.T. Act, 1922, provides that when an assessee is in default in making payment of income-tax the ITO 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.

11. The assessments in the instant case were completed long before the 1st April, 1962, and the TTO issued those notices under Section 46(1) of the 1922 Act as stated in the statement of the case ; therefore, on the facts and in the circumstances of the case, it must be held that the Tribunal's opinion that those proceedings were initiated by the ITO under Section 221 of the 1961 Act and not under Section 46(1) of the 1922 Act is erroneous.

12. Similarly, it must also be held that the appeals filed by the assessee before the AAC were hit by the proviso to Section 30(1) of the Indian I.T. Act, 1922, inasmuch as the assessee did not pay the relevant taxes before the filing of those appeals before him.

13. In the premises we answer both the questions in the negative and in favour of the Revenue.

14. There will be no order as to costs.

R.N. Pyne, J.

I agree.


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