1973 (2) TMI 27 - HC - Income Tax

Petitioner in this application challenges three orders of penalty passed under section 73(5) of the Estate Duty Act, 1953, read with section 46(1) of the Indian Income-tax Act, 1922 - When a certificate was issued for collection under Public Demands Recovery Act and the certificate officer allowed payment to be made in installments, whether penalty can be levied by Assistant Controller for non-payment of installments as allowed by him

Summary

Issues:
1. Challenge to penalty orders under the Estate Duty Act and Indian Income-tax Act.
2. Interpretation of "in default" under section 46(1) of the Indian Income-tax Act, 1922.
3. Consideration of default under the Bengal Public Demands Recovery Act.
4. Liability of an assessee for payment under the Acts.
5. Imposition of penalty when an assessee is in default.

Detailed Analysis:
The petitioner challenged penalty orders dated 30th March 1964, 27th April 1964, and 8th June 1966 under the Estate Duty Act and Indian Income-tax Act. The contention was based on the interpretation of "in default" under section 46(1) of the Indian Income-tax Act, 1922, and section 73(5) of the Estate Duty Act, 1953. The petitioner argued that being granted instalments by the certificate officer under the Bengal Public Demands Recovery Act, they were not "in default." However, the court held that failure to pay instalments granted would constitute default under the Acts, regardless of the Bengal Public Demands Recovery Act's provisions.

The court emphasized that the liability to pay under the Acts is independent of proceedings under the Bengal Public Demands Recovery Act. Section 45 of the Act specifies the time for payment and default conditions. If an assessee fails to pay instalments as ordered, they are considered in default under the Acts. The court clarified that an assessee can be in default under the Indian Income-tax Act and Estate Duty Act even if not in default under the Bengal Public Demands Recovery Act. The time for imposing penalties is governed by the Acts, irrespective of certificate proceedings.

Consequently, the court dismissed the application under article 226 of the Constitution, ruling that the petitioner was not entitled to relief. The rule nisi was discharged, and the interim order was vacated. No costs were awarded in this matter. The judgment highlights the importance of compliance with payment obligations under tax laws and the implications of default, emphasizing the distinct legal frameworks governing penalties and recovery processes under different Acts.