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Issues Involved:
1. Whether the order passed by the Appellate Assistant Commissioner dated 13th February, 1952, is an order passed under section 31 of the Income-tax Act and an appeal lies to the Tribunal from it? 2. Whether on the facts and circumstances of the case an appeal lies to the Appellate Assistant Commissioner from an order passed by the Income-tax Officer levying penal interest under section 18A(8) of the Income-tax Act? Issue-wise Detailed Analysis: 1. Whether the order passed by the Appellate Assistant Commissioner dated 13th February, 1952, is an order passed under section 31 of the Income-tax Act and an appeal lies to the Tribunal from it? The Tribunal held that the order passed by the Appellate Assistant Commissioner, which determined that no appeal lay against the imposition of penal interest by the Income-tax Officer, was indeed an order under section 31 of the Income-tax Act. Consequently, it was determined that an appeal could be made to the Tribunal from such an order. This view was supported by the precedent set in K.K. Porbunderwalla v. Commissioner of Income-tax, Bombay City [1952] 21 I.T.R. 63, where it was established that if an order is made under section 31, an appeal to the Tribunal is permissible. Therefore, the Tribunal's decision to remand the appeal to the Appellate Assistant Commissioner for disposal according to law was upheld. The court answered this question in the affirmative. 2. Whether on the facts and circumstances of the case an appeal lies to the Appellate Assistant Commissioner from an order passed by the Income-tax Officer levying penal interest under section 18A(8) of the Income-tax Act? The Income-tax Officer imposed penal interest on the assessee under section 18A(8) for the assessment years 1947-48 and 1948-49 due to non-payment of advance tax. The assessee appealed to the Appellate Assistant Commissioner, who held that no appeal lay against the penal interest imposed. The Tribunal, however, held that an appeal did lie to the Appellate Assistant Commissioner regarding the levy of penal interest under section 18A(8). Section 18A, introduced by Act XI of 1944, outlines the machinery for assessment of advance tax. Sub-section (8) specifies that if no advance tax is paid, the assessee is liable to pay interest calculated as per sub-section (6), which includes an automatic reduction of interest if the amount on which interest was payable is reduced due to an appeal or revision. The court considered the broader interpretation of "assessment" as used in section 30, which allows appeals against orders of the Income-tax Officer. However, it distinguished between tax and penalty, emphasizing that the primary purpose of the Income-tax Act is to recover tax, not penalties. The court noted that while appeals are provided for penalties under various sections (e.g., sections 25, 28, 44E, 45, 46), no specific appeal is provided for penal interest under section 18A(8). The court concluded that penal interest is more a matter of computation following regular assessment, and the assessee can challenge the regular assessment on all points that could affect the liability to pay advance tax and consequently penal interest. Therefore, the court held that there is no right of appeal against the order imposing penal interest. The answer to this question was in the negative. Conclusion: The court concluded that an appeal lies to the Tribunal from the order of the Appellate Assistant Commissioner under section 31, but no appeal lies to the Appellate Assistant Commissioner from an order levying penal interest under section 18A(8). The Tribunal's decision to remand the case to the Appellate Assistant Commissioner for disposal according to law was upheld, and the assessee was directed to pay the costs. The reference was answered accordingly.
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