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TMI Blog1999 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... d executed a surety bond dated May 7, 1974, for the value of stocks worth Rs. 1,00,559 belonging to one Guru Nanak Metal Stores, 67/40, Bhusa Toli, Daulatganj, Kanpur, which was seized by the Income-tax Department in pursuance of the search conducted on April 27, 1974, at the business premises of the aforesaid Guru Nanak Metal Stores. In order to get it released in terms of the surety bond, the petitioner deposited the title deed of his immovable property bearing house No. 18/ 183-A, Kurswan, Kanpur, with the Commissioner of Income-tax, Kanpur, respondent No. 4, by way of equitable mortgage. The petitioner further undertook that if the said amount of Rs. 1,00,559 or as may be determined as income-tax, wealth-tax and/or gift-tax liability of the firm and its partners to the extent of Rs. 1,00,559 or less as confirmed or varied by the appellate authorities or as settled by the Commissioner of Income-tax, Kanpur, and the said tax liability as may be determined up to the extent of Rs. 1,00,559 only shall be realised from him by sale of his property mentioned in the schedule of the surety bond. He further undertook that he shall not mortgage or charge or in any way encumber the said pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house No. 18/183-A, Kurswan, Kanpur. However, the Commissioner of Income-tax, respondent No. 3, vide letter dated March 20, 1986, informed the petitioner that the title deed of the said property could only be released if the petitioner arranges to pay the demand which is outstanding against the firm. The petitioner once again requested respondent No. 3 to release the title deed of the property whereupon he was directed to meet the Income-tax Officer, Circle-1(6), Kanpur, respondent No. 1. However, respondent No. 1 vide order dated April 29, 1987, had informed the petitioner that the title deed of the property No. 18/183-A, Kurswan, Kanpur, cannot be released till the entire amount of the penalty is paid or satisfactory arrangement for payment is being made. Instead of releasing the title deed of his immovable property No. 18/183-A, Kanpur, he had been informed by the Tax Recovery Officer, respondent No. 2, that he will take coercive measures for the realisation of the amount of penalty (Rs. 1,18,540) which is outstanding against the said firm by attaching and selling the immovable property of the petitioner. In the counter affidavit filed by Sri Arun Kumar Bhatia, Inspector, att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the surety bond dated 7th May, 1974, executed by the petitioner along with two other persons (filed as annexure A to the writ petition). The petitioner cannot be made liable to pay the amount of penalty imposed against the said firm as he has neither stood surety for the amount of penalty nor undertaken at any point of time to pay the said amount. Thus, the amount of penalty cannot be recovered from the petitioner and he is entitled for the release of the title deeds of the immovable property bearing No. 18/183-A, Kurswan, Kanpur. Mr. Mahajan further submitted that under the scheme of the Act, tax and penalty are understood and treated differently. He further submitted that section 2(43) of the Act, defines tax and it nowhere includes penalty whereas section 156, which relates to notice of demand specifically refers to tax, interest, penalty, fine or any other sum payable in consequence of any order passed under the Act. Likewise, various sections contained in Chapter XXI of the Act, which deals with penalties, provide for imposition of penalty in addition to any tax payable by the assessee. Thus, according to him, tax and penalty are different. Mr. Mahajan further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative assessee is subject to the same duties, responsibilities and the liabilities with regard to the income in respect of which he is a representative assessee. He equated the petitioner, who stood as a surety to that of a representative assessee. He further submitted that the petitioner is liable to pay the said amount as the same has been imposed under section 271(1)(c) of the Act, and the provisions of section 221 are fully attracted in the present case. Section 2(43) of the Act defines tax as follows : "2. (43) 'tax' in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date." It does not specifically include penalty. Section 156 of the Act, which relates to notice of demand specifically refers to tax, interest, penalty, fine or any other sum payable under the Act. Section 156 of the Act, is reproduced below : "156. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the liability for payment of penalty imposed upon the firm and its partners, the respondents cannot realise the said amount from the petitioner. From a perusal of the terms of the surety bond executed by the petitioner on May 7, 1974, which has been reproduced above, we find that the petitioner has only undertaken to pay the income-tax, wealth-tax and/or gift-tax liability of the firm, Guru Nanak Metal Stores, and its partners to the extent of Rs. 1,00,559 only. The petitioner had not agreed or undertaken to pay the amount of penalty. He had further neither agreed nor undertaken to pay any liability under the Direct Tax Act, as contended by the respondents. Thus, in our view, the petitioner cannot be asked to deposit or to pay the outstanding amount of penalty imposed under section 271(1)(c) of the Act against Guru Nanak Metal Stores, Kanpur, as he had not stood surety for the said amount. We further find that by the subsequent conduct of respondent No. 1, i.e., when he refunded the excess amount of income-tax and interest deposited by the firm in consequence of the order passed by the Commissioner of Income-tax (Appeals) as also giving the clearance certificate under section 230A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovered from the petitioner is the outstanding amount of the penalty imposed under section 271(1)(c) of the Act, on the firm, Guru Nanak Metal Stores, Kanpur, and not on the petitioner. We have already found that the petitioner had not stood surety for the amount of penalty that may be imposed upon the said firm. Thus, the said amount cannot be realised from the petitioner by invoking section 221 of the Act. Likewise, the provision of section 271(1)(c) of the Act, which provides for imposition of penalty for concealment is not at all attracted in the present case. The petitioner is not challenging the order of penalty under section 271(1)(c) of the Act, imposed upon the firm. No penalty under section 271(1)(c) of the Act has been imposed upon the petitioner. Thus, reliance placed by the respondents on section 271(1)(c) of the Act is, ill-founded. No other point has been pressed before us. We, therefore, hold that the respondents cannot realise the outstanding amount of penalty imposed under section 271(1)(c) against the firm, Guru Nanak Metal Stores, Kanpur, from the petitioner. We, accordingly, quash the order dated April 29, 1987, passed by the Income-tax Officer, Circle-I( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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