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Issues:
Imposition of penalty under section 46 of the Income-tax Act without the Income-tax Officer exercising discretion under section 45 when an appeal is pending. Analysis: The petitioner was assessed by the Income-tax Officer for the year 1951-52, with an income of &8377; 1,91,017 and tax demanded at &8377; 67,383-12-0. The petitioner filed an appeal against this assessment on 5th April, 1956. The Income-tax Officer refused the petitioner's request for time to pay until the appeal was disposed of. The Inspecting Assistant Commissioner granted time till 1st June, 1956. Despite knowing about the pending appeal, the Income-tax Officer imposed a penalty of &8377; 1,500 on 11th June, 1956, under section 46 of the Income-tax Act. The petitioner challenged this penalty through a petition filed on 19th June, 1956. The main appeal against the assessment order was decided on 30th April, 1957, reducing the tax payable to &8377; 4,569-13-0. The key contention was that the Income-tax Officer failed to exercise discretion under section 45 of the Income-tax Act before imposing the penalty under section 46. Section 45 provides that an assessee presenting an appeal may not be treated as in default until the appeal is disposed of. The Income-tax Officer must exercise discretion in such cases. In this instance, the Income-tax Officer did not exercise discretion despite being aware of the pending appeal and the petitioner's requests for time to pay until the appeal was decided. The court held that the imposition of the penalty without the proper exercise of discretion was invalid and set it aside. The reduction in the tax amount due to the successful appeal was also noted by the court. While this reduction may not directly impact the legal analysis, it highlighted the potential hardship the petitioner would have faced if required to pay the higher tax amount pending the appeal decision. The court ultimately set aside the penalty imposed by the Income-tax Officer, stating that it was made without jurisdiction. Each party was directed to bear their own costs in the matter. In conclusion, the court found that the Income-tax Officer's failure to exercise discretion under section 45 before imposing the penalty under section 46 rendered the penalty invalid. The court set aside the penalty of &8377; 1,500 imposed on the petitioner and directed each party to bear their own costs.
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