1958 (4) TMI 115 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer to levy interest under section 18A(8) of the Income-tax Act.
2. Applicability of section 35 of the Income-tax Act for rectifying mistakes.
3. Interpretation of section 18A and its sub-sections.
4. Applicability of the Merged States (Taxation Concessions) Order, 1949.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Income-tax Officer to Levy Interest under Section 18A(8):
The petitioners contended that the levy of interest on the tax assessed was illegal and beyond the jurisdiction of the Income-tax Officer. The court examined the provisions of section 18A(8) which mandates the Income-tax Officer to add interest where no advance payment of tax has been made. The court concluded that the Income-tax Officer has a statutory duty to charge interest in such cases, and this duty is not discretionary. Therefore, the levy of interest was within the jurisdiction of the Income-tax Officer.

2. Applicability of Section 35 for Rectifying Mistakes:
The petitioners argued that under section 35, the Income-tax Officer could only rectify mistakes apparent from the record of the assessment, and the omission to impose interest was not a mistake apparent from the record. The court clarified that the term "record of the assessment" includes all documents leading to the determination of tax payable. A mistake apparent from the record must be obvious and manifest, not requiring elaborate reasoning. The court held that the omission to charge interest was a mistake apparent from the record, as the Income-tax Officer is bound by statute to levy interest where no advance payment has been made.

3. Interpretation of Section 18A and its Sub-sections:
The court analyzed various sub-sections of section 18A, which deals with advance payment of tax. Sub-section (1) empowers the Income-tax Officer to require advance tax payments. Sub-section (3) applies to new assessees, requiring them to estimate and pay tax in advance. Sub-section (6) mandates interest for under-estimation of tax, while sub-section (8) applies when no advance tax is paid. The court clarified that both old and new assessees are subject to these provisions, and the liability to pay interest is distinct from penalties for false estimates under sub-section (9). The court rejected the petitioners' argument that only penalties could be imposed for failure to pay advance tax, affirming that interest is chargeable under sub-sections (6) and (8).

4. Applicability of the Merged States (Taxation Concessions) Order, 1949:
The petitioners suggested that the Income-tax Officer might have thought that rule 11(1) of the Merged States (Taxation Concessions) Order, 1949, applied, which would exempt them from advance tax provisions for the year ending March 31, 1950. The court found this argument unconvincing, noting that even if the Income-tax Officer made such an error, it would still be an error apparent from the record. The court emphasized that the statutory duty to charge interest under section 18A(8) overrides any mistaken application of the Merged States Order.

Conclusion:
The court dismissed all contentions raised by the petitioners, affirming the statutory duty of the Income-tax Officer to levy interest under section 18A(8) and the applicability of section 35 for rectifying the omission. The petitions were dismissed with costs, and the levy of interest was upheld as lawful and within the jurisdiction of the Income-tax Officer. The court emphasized that interest under sections 18A(6) and (8) is not penal but a statutory impost similar to income-tax.