1961 (4) TMI 126 - HC - Income Tax

Summary

Issues:
Challenge to the validity of order imposing penalties for tax years 1953-57 based on the absence of fresh demand notices after reduction of tax by Appellate Assistant Commissioner under Indian Income-tax Act, 1922.

Analysis:
The petitioner contested the penalties imposed by the Income-tax Officer for tax years 1953-57, arguing that without fresh demand notices post-Appellate Assistant Commissioner's reduction of tax, he cannot be deemed a defaulter under section 45 of the Indian Income-tax Act, 1922, thus challenging the validity of the order (Exhibit A). The Appellate Assistant Commissioner had reduced the tax amounts for 1953-56, but not for 1957, leading to the issue at hand.

The crux of the matter lies in whether fresh demand notices are necessary when an Appellate Assistant Commissioner alters the original assessment. The petitioner relied on precedents like Metropolitan Structural Works Ltd. v. Union of India and Seghu Buchiah Setty v. Income-tax Officer, emphasizing the need for a fresh notice of demand post-reduction of tax by the Appellate Assistant Commissioner to deem the assessee as a defaulter under section 45.

Contrary to the petitioner's stance, the court, in line with the decision in Ladhuram Taparia v. D.K. Ghosh, held that when an Appellate Assistant Commissioner reduces or confirms an original assessment, a fresh notice of demand under section 29 of the Act is not mandatory. The court reasoned that the tax due is a consequence of the original assessment, whether confirmed or reduced, thus obviating the necessity of fresh demand notices post-Appellate Assistant Commissioner's orders.

Moreover, the court referred to George v. Income-tax Officer, Madras, where the reduction of tax liability post-appeal did not invalidate the certificate issued earlier under section 46(2) of the Act, reinforcing the principle that the original assessment determines the tax due. The court also highlighted a circular by the Central Board of Revenue, indicating that a copy of the computation of tax reduction should suffice post-Appellate Assistant Commissioner's decision.

Ultimately, the court dismissed the petition, upholding the validity of the penalties imposed by the Income-tax Officer, as the absence of fresh demand notices post-Appellate Assistant Commissioner's orders did not render the petitioner non-liable for penalties under section 46 of the Act.