1974 (1) TMI 7 - HC - Income Tax

Levy of penalty under section 221 - Penalty for default in payment of tax - Whether an Income-tax Officer is competent to levy the penalty - proviso to sub-section (1) of section 201 and clauses (1) and (o) of section 246 of the Act leave no manner of doubt that it is the Income-tax Officer who is authorised to impose a penalty.

Summary

Issues:
1. Imposition of penalties under section 221 of the Income-tax Act, 1961.
2. Interpretation of the provision regarding the authority to impose penalties.
3. Reference to the judgment of the Allahabad High Court and its relevance.
4. Comparison of different sections of the Act to determine the authority to impose penalties.

The judgment dealt with the imposition of penalties under section 221 of the Income-tax Act, 1961, concerning multiple assessment years for the same assessee. The Income-tax Officer had imposed penalties, which were upheld by the Appellate Assistant Commissioner. The assessee contended before the Income-tax Appellate Tribunal that the penalties were not valid as the Act did not specify the authority to impose them. The Tribunal relied on a judgment of the Allahabad High Court, stating it provided sufficient guidance. The Tribunal referred the question of law to the High Court regarding the deletion of penalties. The High Court noted that the Allahabad High Court's decision had been reversed by a Full Bench. The High Court analyzed various sections of the Act to determine the authority to impose penalties under section 221.

The judgment discussed the interpretation of section 221 of the Act, which mentions penalties for defaulting taxpayers. The Full Bench of the Allahabad High Court concluded that the Income-tax Officer could impose penalties under section 221, considering other related sections. The High Court analyzed section 201(1), which defines an assessee in default for failing to deduct and pay tax. It was noted that the Income-tax Officer must be satisfied about the default before imposing a penalty. The High Court emphasized that section 221 applies to all types of defaults, and the intention was for the Income-tax Officer to impose penalties.

The judgment compared different sections of the Act to determine the authority to impose penalties. It highlighted that section 246 allows appeals against orders under section 221, indicating the legislative intent for the Income-tax Officer to impose penalties. The High Court discussed sections 140A(3), 272, and 273, where the Income-tax Officer is designated to impose penalties. It was clarified that section 271 allows penalties to be imposed by either the Income-tax Officer or the Appellate Assistant Commissioner, but section 221 specifies the Income-tax Officer's authority.

In conclusion, the High Court answered the question referred in the negative, favoring the revenue. The judgment emphasized that the Income-tax Officer is authorized to impose penalties under section 221 based on a holistic interpretation of the relevant provisions. No costs were awarded due to the peculiar circumstances of the case.