COMMISSIONER OF INCOME TAX Vs. SARASWATHI AMMAL K

JUDGEMENT

(1.) THE following question of law has been referred to this court at the instance of the Revenue for its opinion :

(2.) THE assessee was levied a penalty of Rs. 16,700 for non-payment of advance tax of Rs. 3,34,967.63 demanded under s. 210(3) of the Act for the assessment year 1965-66. THE imposition of the said penalty was challenged by the assessee before the AAC on various grounds. THE AAC, while rejecting all the other grounds, accepted the following two contentions of the assessee : (1) that there was no valid or proper show-cause notice before the actual levy of penalty as contemplated by s. 221(1), proviso, of the Act; and (2) that in any event the computation of advance tax of Rs. 3,34,967.63 having been made by the ITO in rectification proceedings under s. 154 without giving a show-cause notice as provided under sub-s. (3) of s. 154, the demand for advance tax is itself invalid and consequently the levy of penalty for non-payment of such an advance tax is also invalid. On this basis the AAC allowed the appeal filed by the assessee. THE Revenue took the matter on appeal before the Tribunal, as against the decision of the AAC on the above two points. THE assessee filed cross-objections questioning the findings of the AAC on the other contentions of the assessee. THE Tribunal upheld the finding of the AAC on the first contention referred to above, and dismissed the appeal of the Revenue without going into the tenability of or otherwise of the second contention urged by the assessee before the AAC and upheld by it. According to the Tribunal, the ITO, having given time for payment up to March 24, 1965, by his letter dated March 17, 1965, should have waited till the expiry of March 24, 1965, before giving any show-cause notice proposing to levy penalty for non-payment of the advance tax and the ITO was in error in issuing a composite notice wherein time has been given to the assessee for payment of advance tax up to March 24, 1965, and at the same time the show-cause notice has also been given for non-payment of tax in case the assessee is not paying her tax on or before March 24, 1965. On the basis that the notice issued by the ITO to the assessee on March 17, 1975, is not a valid show-cause notice as contemplated by s. 221(1), proviso, the Tribunal has held that the levy of penalty without issuing a valid show-cause notice is invalid. Aggrieved by the order of the Tribunal, the Revenue has obtained this reference on the question set out above. THE scope of the question referred to us can be appreciated properly if the facts and circumstances leading to the demand for advance tax under s. 210(3) and the levy of penalty for non-payment of the advance tax under s. 221(1), proviso, are kept in mind. In this case, the ITO originally issued a notice to the appellant on August 21, 1964, under s. 210(1) of the Act demanding payment of the advance tax of Rs. 33,120.50 for the year 1965-66. THE said figure of Rs. 33,120.50 was determined on the basis of the assessee's last completed assessment for 1961-62 in which the total income has been computed at Rs. 83,131. On September 2, 1964, the assessee had filed her return for 1964-65 admitting an income of Rs. 5,79,981 on the basis of which the ITO made a provisional assessment on January 21, 1965, under s. 141 of the Act. This provisional assessment on January 21, 1965, under s. 141 of the Act. This provisional assessment resulted in a tax demand of Rs. 3,63,350.70. Following the said provisional assessment for 1964-65 based on the assessee's own return, the ITO amended the earlier advance tax demand for 1965-66 by an order dated January 22, 1965, under s. 210(3) fixing the advance tax at Rs. 3,41,270.25. Subsequently, the ITO rectified the provisional tax demand for 1964-65 as also the quantum of advance tax payable for 1965-66 and served a fresh demand on the assessee on February 26, 1965, fixing the advance tax demand at Rs. 3,46,007.63. However, before rectifying the demand for advance tax, no show-cause notice was issued to the assessee under s. 154(3). Since the assessee did not pay the advance tax as demanded after rectification on the due dates, the ITO issued a letter on March 17, 1965, asking the assessee to pay the balance of the advance tax on or before March 24, 1965, and stating that failing the payment on the said date to show cause why the penalty should not be imposed for default in payment of the advance tax. As there was no payment of advance tax on or before March 24, 1965, the ITO proceeded to levy penalty of Rs. 16,700 under s. 221 on March 26, 1965. It is that order of penalty which was challenged by the assessee before the AAC. As already stated, the AAC held that the order levying penalty is invalid on two grounds, viz., (1) that before levying penalty there was no proper show-cause notice issued to the assessee to show-cause why penalty should not be levied for non-payment of advance tax as contemplated by s. 221(1), proviso, and (2) that the demand for advance tax based on the provisional assessment for the year 1964-65 itself is invalid as the determination of the advance tax has been done by way of rectification without any show-cause notice to the assessee as contemplated by the statute, and therefore, the demand for advance tax with reference to which the levy of penalty has been made is itself invalid, and, therefore, there is no question of any levy of penalty for non-payment of such an advance tax. When the matter went before the Tribunal, the Tribunal sustained the first ground of the AAC but, without giving its view on the second question. Thus, while the AAC invalidated the order levying penalty on two grounds, the Tribunal has confined its decision only to one ground and it has not expressed its opinion on the second ground.

(3.) HOWEVER, the matter does not rest there. As already stated, the order levying penalty has been aside by the AAC on two grounds. As a result of our holding that the order levying penalty is not invalid on the ground of non-compliance with the proviso to s. 221(1), the further question automatically arises as to whether the recitification order dated February 26, 1965, which was made without issuing a show-cause notice to the assessee, is invalid, as has been held by the AAC. In this case, the Tribunal has felt that it is unnecessary to go into that aspect finally as they had upheld the invalid order levying penalty on the other ground of non-compliance with s. 221(1), proviso. As a result of our answer being against the assessee, the Tribunal has to necessarily consider the other contention put forward by the assessee and accepted by the AAC, that as the demand for advance tax itself is invalid for non-issue of a show-cause notice before invoking the power of rectification, the order levying penalty for non-payment of such advance tax is invalid. It is also seen from the order of the Tribunal that the assessee in his cross-objections sought adjudication on several issues, but it has considered and decided only the first question. Now that the assessee is not successful on the question referred before us, the matter has to be remitted to the Tribunal for its adjudication on the other contentions advances by the assessee. There will be no order as to costs.