1961 (9) TMI 99 - HC - Income Tax

Summary

Issues:
1. Imposition of penalty under section 28(1)(c) on a dissolved firm.
2. Imposition of penalty under section 46(1) for non-payment of penalty.

Analysis:
1. The firm was assessed to income tax after its dissolution, and penalties were imposed under sections 28(1)(c) and 46(1) of the Income-tax Act. The petitioner contested the penalties on the grounds that penalty under section 28(1)(c) could not be imposed on a dissolved firm. However, the Supreme Court precedent in C.A. Abraham v. Income-tax Officer established that penalties under section 28(1)(c) could be imposed on dissolved firms as part of the tax liability assessment. Therefore, this ground was not considered valid by the court.

2. The petitioner argued that penalty under section 46(1) for non-payment of the penalty imposed under section 28(1)(c) was not justified. Citing decisions from the Travancore-Cochin High Court and the Kerala High Court, the petitioner contended that section 46(1) pertained to default in income tax payment, not penalty payment. However, the court disagreed, stating that the penalty under section 28(1)(c) was akin to additional income tax, as per the Supreme Court's interpretation. The court further emphasized that section 46 should be liberally interpreted to include additional tax liabilities like penalties under section 28(1)(c).

3. The court also referenced the Collector of Malabar v. Erimmal Ibrahim Hajee case to highlight that penalties for non-payment of tax demands under section 46(1) were considered a mode of recovery, aligning with the coercive nature of tax collection. Additionally, English cases were cited to support the liberal interpretation of tax collection sections like section 46. Consequently, the court concluded that the Income-tax Officer had the authority to impose penalties under section 46(1) for non-payment of penalties under section 28(1)(c).

In conclusion, the writ petition challenging the imposition of penalties on the dissolved firm was dismissed by the court, emphasizing the applicability of penalties under the Income-tax Act and the authority of the Income-tax Officer to enforce tax liabilities, including penalties.