1962 (1) TMI 9 - SC - Income Tax

Whether the benefit of the fifth proviso to section 18A(6) could be claimed in respect of the assessments of the income of the respondent s family which were completed by the Income-tax Officer before April 1 1952? Held that - High Court was right in holding that the Income-tax Officer had the power in the case of the assessments in question to exercise the authority conferred by the fifth proviso to section 18A(6) and he having failed to exercise the discretion a writ requiring him to consider whether a case is made out for the exercise of his discretion was properly issued. Appeal dismissed.

Summary

Issues Involved:
1. Legality of imposing interest under Section 18A(6) of the Indian Income-tax Act.
2. Applicability of the fifth proviso to Section 18A(6) for assessments completed before April 1, 1952.
3. Discretionary power of the Income-tax Officer to waive or reduce interest under the fifth proviso.

Issue-wise Detailed Analysis:

1. Legality of imposing interest under Section 18A(6) of the Indian Income-tax Act:
The respondent, M. R. Vidyasagar, contested the imposition of interest under Section 18A(6) of the Indian Income-tax Act, arguing that it was penal in character and unjustified given the circumstances. The Madras High Court held that the provision imposing liability to pay interest under sub-section (6) of section 18A was not opposed to law and could be enforced against the legal representative of the deceased manager.

2. Applicability of the fifth proviso to Section 18A(6) for assessments completed before April 1, 1952:
The central question was whether the benefit of the fifth proviso to Section 18A(6) could be claimed for assessments completed before April 1, 1952. The High Court opined that even if the assessment by the Income-tax Officer was completed before April 1, 1952, if the final adjustment pursuant to the order of the Appellate Tribunal was made after that date, the Income-tax Officer was competent to reduce or waive the interest payable by the assessee. The Supreme Court upheld this view, stating that the jurisdiction under the fifth proviso could be exercised in all cases pending on April 1, 1952, before the Income-tax Officer or any superior authority.

3. Discretionary power of the Income-tax Officer to waive or reduce interest under the fifth proviso:
The fifth proviso to Section 18A(6) and Rule 48 authorized the Income-tax Officer to reduce or waive interest in specified circumstances. The Supreme Court noted that there was nothing in the rule indicating that the power to grant relief was restricted to cases decided after April 1, 1952. The Court emphasized that the power to reduce or waive interest could be exercised even if the regular assessment was completed before April 1, 1952, as long as the assessment was pending in appeal or subject to modification by a superior authority. The Court concluded that the Income-tax Officer had the discretion to exercise this power in the present case, and the High Court was correct in issuing a writ requiring the Officer to consider whether a case for exercising this discretion was made out.

Conclusion:
The Supreme Court dismissed the appeals, affirming that the Income-tax Officer had the authority to reduce or waive the interest payable under Section 18A(6) in light of the fifth proviso, even for assessments completed before April 1, 1952, provided the assessments were pending in appeal or subject to modification. The Court upheld the High Court's directive for the Income-tax Officer to reconsider the imposition of interest in the circumstances of the case.