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Issues involved: The judgment involves the cancellation of penalties levied under section 221 for non-payment of penalties imposed under section 271(1)(c) for the assessment years 1963-64, 1964-65, and 1968-69.
Summary: The High Court of Bombay delivered a judgment regarding a reference made under section 256(1) of the Income-tax Act, 1961, by the Revenue. The question referred was whether the Appellate Tribunal was correct in canceling penalties levied by the Income-tax Officer under section 221 for non-payment of penalties imposed under section 271(1)(c) for the mentioned assessment years. The penalties were imposed during the assessment years in question, and the Tribunal had to decide on the validity of these penalties. The Tribunal, based on the definition of "tax" in section 2(43) of the Act, and a judgment of the Calcutta High Court, canceled the penalties levied under section 221(1) of the Act. The provision of section 221(1) was analyzed, emphasizing that penalty is leviable only when the assessee is in default in making a payment of "tax" as defined in the Act. It was established that the assessee was not in default in payment of income tax chargeable under the Act, and therefore, the penalties under section 221 were not justified. The judgment referred to a case from the Calcutta High Court where the distinction between "tax" and "interest" was highlighted, emphasizing that penalty can only be imposed when there is a default in making payment of tax. Applying this principle, the High Court concluded that there was no basis for the imposition of penalties under section 221(1) for non-payment of penalties levied under section 271(1)(c) of the Act. In conclusion, the High Court answered the question in favor of the assessee, stating that the penalties under section 221 were not valid in this case. No costs were awarded in this matter.
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