1972 (8) TMI 13 - HC - Income Tax

Levy of penalty under section 221(1) - petitioner defaulted in the payment of income-tax assessed on him

Summary

Issues:
Interpretation of Section 221 of the Income-tax Act, 1961 regarding the power of the Income-tax Officer to impose penalty on defaulting taxpayers.

Analysis:
The petitioner defaulted in paying income tax, leading to a penalty imposed by the Income-tax Officer under Section 221. The petitioner challenged this penalty through a revision before the Commissioner of Income-tax, which was rejected. The petitioner contended that Section 221 does not explicitly grant the power to impose penalties to the Income-tax Officer, citing a previous Division Bench decision supporting this argument. Due to doubts regarding the previous decision, the case was referred to a larger Bench for clarification.

Upon examination of Section 221 and related provisions, it was found that while Section 221 does not specifically mention the authority to impose penalties, it should be interpreted in connection with other sections of the Income-tax Act. Section 246(o) explicitly mentions that an order imposing a penalty under Section 221 may be made by an Income-tax Officer. Additionally, Section 201(1) and the proviso to sub-section (1) of Section 201 further support the authority of the Income-tax Officer to impose penalties under Section 221.

The judgment emphasized that the context of Section 221, within the broader framework of the Income-tax Act, indicates Parliament's intention to authorize the Income-tax Officer to impose penalties for defaulting taxpayers. The rule of strict interpretation was deemed inapplicable in this case, as the relevant context and interconnections with other sections clarified the authority of the Income-tax Officer.

The petitioner's reliance on a subsequent amendment to Section 221, expressly granting the Income-tax Officer the power to impose penalties, was deemed irrelevant to the interpretation of the unamended section. Ultimately, the petition challenging the penalty imposed under Section 221 was dismissed by the Court, affirming the authority of the Income-tax Officer to levy penalties on defaulting taxpayers.