OM PRAKASH AGARWAL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner was assessed to income-tax for the assessment year 1963-64. A notice of demand was served upon him requiring him to pay income-tax in the sum of Rs. 6,858.88. THE petitioner filed an appeal against the assessment order. During the pendency of the appeal, as the petitioner had not paid the tax assessed against him, a notice was issued by the Income-Tax Officer on November 18, 1965 calling upon him to show cause why a penalty should not be levied under Section 221(1) of the Income-tax Act, 1961. THE notice required the petitioner to appear personally or through an authorised representative on November 24, 1965 or to send a written communication so as to reach the Income-tax Officer on or before that date. On November 23, 1965 the petitioner submitted an application to the Income-tax Officer. THE subject of the application was stated as "Request for stay of disputed tax till decision in appeal," and it was mentioned that an appeal was pending before the Appellate Assistant Commissioner of Income-tax wherein the petitioner expected full relief, that the assessment order was erroneous and that the financial position of the petitioner was not then very sound and he was not in a position to liquidate the demand. Upon these allegations, the petitioner prayed that the Income-tax Officer would treat the petitioner as not being in default during the pendency of the appeal. On December 31, 1965, the Income-tax Officer made an order under Section 221 imposing a penalty of Rs. 500 upon the petitioner for not having paid the entire amount of the assessed tax within the time allowed in that behalf. THE petitioner prays for the quashing of the penalty order and for mandamus directing the Income-tax Officer to decide the application dated November 23, 1965 in accordance with law and further to treat the petitioner as not being in default THE petitioner contends that the Income-tax Officer was bound to consider and dispose of the application dated November 23, 1965 and to determine whether the petitioner should be treated as not being in default. It was only if that determination ended in a finding against the petitioner that the Income-tax Officer could consider the question of imposing a penalty under Section 221(1). THE contention is well founded.

(2.) SECTION 220(1) requires that the amount specified as payable in a notice of demand must be paid within thirtyfive days of service of the notice at the place and to the person mentioned in the notice. SECTION 220(3) empowers the Income-tax Officer to extend the time for payment or allow payment by instalments. SECTION 220(4) provides:

(3.) IN the instant case, the INcome-tax Officer did not dispose of the application of November 23, 1965 before making the order of penalty on December 31, 1965. He was bound to do so and his omission vitiates the penalty order.