1978 (7) TMI 26 - HC - Income Tax

Summary

Issues:
Validity of the order passed by the Income-tax Officer under section 210(2) and the liability of the penalty levied under section 221(1) of the Income-tax Act, 1961.

Analysis:
The case involved a private limited company acting as managing agents during the assessment year 1965-66. The dispute arose from a penalty levied by the Income-tax Officer under section 221(1) of the Income-tax Act, 1961, amounting to Rs. 30,000, later reduced to Rs. 20,000 by the Appellate Assistant Commissioner (AAC).

The issue revolved around the demand for advance tax of Rs. 31,611 from the assessee for the financial year 1964-65. The assessee paid the first installment on December 4, 1964, and filed a return on January 12, 1965, showing an income of Rs. 5,17,205, with tax paid in four subsequent installments. Subsequently, the Income-tax Officer revised the advance tax payable for the assessment year 1965-66 to Rs. 2,87,956, based on the return filed. The assessee did not comply with the revised demand, leading to the penalty imposition.

The Income-tax Officer contended that the revised notice was valid despite partial tax payment under self-assessment. The AAC upheld the penalty but reduced it to Rs. 20,000, rejecting the objections raised by the assessee. The Tribunal considered whether the requirements of section 210(3) were met, emphasizing the necessity of full tax payment for the ITO to amend the advance tax order.

The Tribunal held that the plain meaning of the provision required full tax payment, and since the primary condition of full tax payment was not met by the assessee, the order under section 210(3) was deemed unauthorized. The High Court concurred with the Tribunal's interpretation, emphasizing the plain words of the statutory provision and dismissing alternative constructions.

Ultimately, the High Court ruled in favor of the assessee, affirming the invalidity of the order passed by the Income-tax Officer under section 210(2) and canceling the penalty levied under section 221(1) in favor of the assessee. The Commissioner was directed to bear the costs of the reference.