1972 (3) TMI 4 - HC - Income Tax

Petitioner invoking the jurisdiction of this court under article 226 of the Constitution for the issue of a writ of mandamus or other direction directing the respondents not to take any further steps to recover the penalty imposed on the petitioner.

Summary

Issues:
1. Assessment of income-tax for the year 1956-57 and imposition of penalty.
2. Appeal against the order of assessment and penalty.
3. Jurisdiction of High Court under Article 226 of the Constitution.
4. Interpretation of the effect of an appellate order on original demand and penalty imposition.

Analysis:
1. The petitioner was assessed to income-tax for the year 1956-57 and a demand was raised against him. The petitioner failed to pay the tax within the stipulated time, leading to the imposition of a penalty under section 46(1) of the Income-tax Act. The Appellate Tribunal later accepted the petitioner's appeal, reducing the assessable income and the tax payable. However, the penalty imposed was not affected by the appeal outcome.

2. The petitioner appealed against the order levying the penalty to the Appellate Assistant Commissioner, who rejected the revision due to being time-barred. The petitioner then approached the High Court under Article 226 of the Constitution seeking relief from the penalty imposed. The court analyzed the distinction between assessment proceedings and penalty proceedings, emphasizing that a liability to penalty arises independently of the correctness of the demand.

3. The petitioner argued that the appellate order reducing the tax liability should wipe out the original demand and penalty. Reference was made to a Supreme Court case where it was held that fresh demand notices are required if tax liability is reduced post-appeal. However, the court distinguished this case from the current scenario, where the penalty was imposed before the appellate order reducing tax liability.

4. Subsequent to the Supreme Court judgment, Parliament enacted the Taxation Laws Act in 1964, addressing the issue of recovery proceedings post-reduction of tax liability. The Act specified that if the penalty imposed exceeds the reduced tax amount, the excess penalty cannot be recovered. Accordingly, the High Court directed the respondents not to recover the penalty exceeding the reduced tax amount imposed on the petitioner by the Appellate Tribunal.