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TMI Blog1972 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act was validly imposed? " The assessee was served with notices of demand for four assessment years, being assessment years 1962-63 to 1965-66, demanding the amounts specified in the respective demand notices on December 7, 1965. The total demand for these four years was Rs. 17,680. The assessee received the demands on the same day, but omitted to satisfy the demands within 35 days of the service of the demand notices. He also did not ask for any extension of time. He filed appeals against the demands, but did not apply to the Income-tax Officer for stay of collection of the demands. A notice was issued on February 5, 1966, by the Income-tax Officer asking the assessee to show cause on February 17, 1966, as to why the penalty may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal amount of Rs. 20,174 as against the total demand of Rs. 17,680. The Tribunal, therefore, directed the assessing officer to verify the correctness of the stand of the assessee that by the date of penalty he had not only satisfied the demand raised against him, but had made some extra payment and in case the assessee's stand was correct, no penalty should at all be levied and in case there was a part of the demand outstanding on March 22, 1966, suitable penalty on the line adopted by the Appellate Assistant Commissioner may be imposed. According to the revenue, (1) the assessee was already a defaulter having not paid the tax demanded from him within 35 days from the service of notices of demand under section 156 of the Act. Even if by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer on the 21st of March, 1966, and pointed out the mistakes in the demands raised, it was obligatory on the part of the assessing officer to revise the demands and issue fresh demands against the assessee. The assessee could incur the liability of penalty within the meaning of section 221(1) of the Act by being a defaulter under section 220 thereof only after the passing of 35 days from the raising of such new demand. It is his further stand that when the assessing officer in realisation of his own mistake agreed to issue a challan for Rs. 8,000 on the 21st of March, 1966, possibly taking into account the interest that may be due on the amount not paid by then, the default, if any, was indeed condoned and after the assessee had paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered from an assessee as advance tax in pursuance of this Chapter shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment." Thus, when a notice of demand is issued under section 156 of the Act, credit has to be given in terms of section 219 thereof and demand is required to be raised only in respect of the excess amount of tax over and above what had been paid by way of advance tax. The demands raised in the present case, therefore, were not in accordance with law, inasmuch as, while raising such demands, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the amount of tax determined under section 23(3) in order to determine the amount of tax on which computation of penalty was to be based. We have no doubt in our minds that in regard to past liability penalty is leviable even after the liability has been satisfied because satisfaction of the demand at a subsequent date does not wipe out the liability created under the statute for the past default and it cannot be laid down as a proposition of law that there must be an existing default in order that an appropriate authority may have jurisdiction under the Act to impose penalty for any default. Adverting to the facts of this case, there is substantial force in the contention of the assessee's counsel that when the error in the demands w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Income-tax Officer had jurisdiction to levy penalty under section 221(1) of the Act before that provision was suitably amended by the Taxation Laws (Amendment) Act, 1970, by mentioning the Income-tax Officer as the authority empowered to impose penalty. The decision of the Allahabad High Court already referred to directly supports the assessee's contention that the Income-tax Officer prior to the amendment could not be the proper authority to levy penalty. On the facts of the case, we have already come to our conclusion that levy of penalty was not proper. It is, therefore, not very much necessary for disposing of the reference to decide the question of jurisdiction of the Income-tax Officer. But we are not inclined to accept the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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