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Challenge to the recovery of penal interest under section 18A(6) of the Income-tax Act for the assessment year 1945-46. Analysis: The petitioner objected to the recovery of penal interest amounting to Rs. 3,156 imposed by the Income-tax Officer under section 18A(6) for the assessment year 1945-46. Initially, no penal interest was levied in the assessment order dated January 31, 1950, as per the law at that time. However, the Income-tax Officer later served a notice proposing to impose penal interest, which was duly imposed, and a notice of demand was served on February 12, 1951, amounting to Rs. 6,904-3-0. Subsequently, through appeals, the assessable income was reduced, leading to a revised demand where the penal interest was reduced to Rs. 3,156. The petitioner challenged the legality of this reduced penal interest amount through a writ petition. The first point raised was regarding the necessity of a separate order for imposing penal interest. The counsel argued that a notice of demand could only be issued consequent to an order passed under the Income-tax Act. However, the court held that for penal interest imposition, a separate order was not mandatory, and the liability could be created by calculation and entry in the assessment form. The Income-tax Officer rectified the assessment order under section 35 to impose the penal interest, which was considered a conscious act, satisfying the legal requirement. The second point raised referred to a Bombay High Court decision where rectification under section 35 was questioned due to the discretionary nature of imposing penal interest post an amendment. The court distinguished this case from the present one, emphasizing that the circumstances and legal provisions were different. The court found no merit in this argument as it did not apply to the current case. Conclusively, the court dismissed the writ petition challenging the recovery of penal interest, upholding the legality of the reduced amount of Rs. 3,156, and ordered the petitioner to bear the costs incurred in the legal proceedings.
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