INCOME TAX OFFICER Vs. MOHAMMED KUNHI

JUDGEMENT

(1.) The short but important question which is involved in this appeal by special leave from a judgment of the Kerala High Court is whether the Appellate Income-tax Tribunal has the power, under the relevant provisions of the Income-tax Act, 1961, (hereinafter called the Act) to stay the recovery of the realization of the penalty imposed by the departmental authorities on an assessee during the pendency of an appeal before it.

(2.) The assessee, who is the respondent, was imposed penalties in the sum of Rs. 18,000, 1,700 and 14,000 respectively in respect of the assessment years 1954-55, 1960-61 and 1961-62. These penalties were imposed under S.271(1)(c) read with Section 274 (2) of the Act for concealment of particular income and furnishing inaccurate particulars. The assessee preferred appeals to the Income tax Appellate Tribunal and made an interim prayer for stay of collection of the penalties imposed. The tribunal declined to order any stay holding that it had no power to grant such a prayer. The assessee then moved the High Court under Article 226 of the Constitution. The High Court held that the Tribunal had the power to stay the proceedings as also the collection of the penalties pending the appeal since that power was incidental and ancillary to its appellate jurisdiction. The Tribunal was consequently directed to dispose of the stay application in accordance with law.

(3.) The relevant provisions of the Act may be first noticed. Section 156 provides that when any tax interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Income tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. Under Section 220 (1) any amount specified in the notice of demand under Section 156 has to be paid within 35 days of the service of the notice or within such lesser periods as may be specified under the proviso to sub-section (1). If the amount is not paid within the period limited or extended (the assessee can ask for an extension) the assessee shall be deemed to be in default. Sub-section (6) of Section 220 provides that where an assessee has presented an appeal under Section 246 the Income-tax Officer may, in his discretion and subject to such conditions as he may think fit, treat the assessee as not being in default so long as the appeal remains pending. Section 221 provides for the imposition of penalty when the assessee is in default. Section 222 to 224 relate to the issuance of a certificate to the Tax Recovery Officer. Under Section 225 the Income-tax Officer can order stay of proceedings, even after the certificate has been issued to the Tax Recovery Officer. It may be mentioned that the last four section in terms relate to recovery of tax, but by virtue of Section 229 any penalty imposed is also recoverable in the same manner. Section 246 to which reference has been made in Section 220 (6) gives the appealable orders against which an assessee may appeal to the Appellate Assistant Commissioner. Appeals to the Tribunal are dealt with by Sections 252 to 255. Section 252 provides merely for constitution of the tribunal. Section 253 says that any assessee aggrieved by the orders set out in Clauses (a), (b) and (c) of sub- section (1) may appeal to the tribunal. The Commissioner is also entitled to direct the Income Tax Officer to the an appeal against the order of an Appellate Assistant Commissioner made under Section 250. Section 254 specifies the orders which the tribunal can make. Sub-section (1) which is material may be reproduced below:-