1960 (2) TMI 72 - HC - Income Tax

Summary

Issues Involved
1. Quashing of penalties levied by the Income Tax Department.
2. Validity of the service of demand notices.
3. Nature of the Commissioner's jurisdiction under section 33A of the Income Tax Act.
4. Discretion of the Income Tax Officer under section 45 of the Income Tax Act.

Issue-wise Detailed Analysis

1. Quashing of Penalties Levied by the Income Tax Department
The appeals were filed against the order quashing the penalties levied by the Income Tax Department. The respondent, a limited company, had defaulted on tax payments for the assessment years 1948-49 and 1949-50. The Income Tax Officer had levied penalties under section 46(1) after the company failed to pay the taxes within the stipulated time. The penalties were contested on the grounds that there was no proper order specifying the penalty before the demand notices were served and that the service of notices was invalid.

2. Validity of the Service of Demand Notices
The respondent argued that the service of demand notices was invalid as they were not personally served on the managing director but affixed to the business premises. The court found that the service by affixture was valid under Order XXIX, rule 2, of the Civil Procedure Code, which allows service on a corporation by leaving it at the registered office. The court noted that the managing director was bedridden, but other directors and staff were aware of the notices. Therefore, the service was deemed to have complied with legal requirements.

3. Nature of the Commissioner's Jurisdiction under Section 33A of the Income Tax Act
The court examined whether the Commissioner acted in a judicial or administrative capacity under section 33A. It was concluded that the Commissioner's jurisdiction under section 33A was administrative. The section provides a mechanism for the Commissioner to review and rectify mistakes made by subordinate officers. Unlike section 33B, which requires a hearing and allows for an appeal, section 33A does not confer a right to a hearing or appeal, indicating its administrative nature. The court cited precedents, including the Privy Council's decision in Commissioner of Income Tax v. Tribune Trust, to support this view.

4. Discretion of the Income Tax Officer under Section 45 of the Income Tax Act
The respondent contended that the Income Tax Officer should not have treated the company as a defaulter while an appeal was pending. The court held that section 45 provides the officer with discretion to stay the collection of tax but does not grant an absolute right to the assessee. The officer's refusal to stay the collection was not arbitrary or capricious, as the company had not paid any part of the tax despite warnings and opportunities to pay in installments. The court found no merit in the argument that the officer's discretion was improperly exercised.

Conclusion
The court disagreed with the lower court's judgment that there was no proper order specifying the penalty and that the service of notices was invalid. It also found that the Commissioner's jurisdiction under section 33A was administrative, not judicial, and thus not subject to removal on certiorari. The Income Tax Officer's discretion under section 45 was exercised appropriately. Consequently, the appeals were allowed, quashing the lower court's decision, but no order as to costs was made.