COMMISSIONER OF INCOME TAX Vs. HATHIRAMANI P B

JUDGEMENT

(1.) THIS reference, made under S. 256(1) of the IT Act, 1961, at the instance of the Revenue, in respect of asst. yrs. 1963 64, 1964 65 and 1968 69, refers the following question for the opinion of this Court :

(2.) DURING the assessment years in question, the IAC levied penalties of Rs. 7,000, Rs. 21,000 and Rs. 14,000, respectively, under S. 271(1) of the Act by orders made on 31st Dec., 1973. The assessee appealed against these orders. During the pendency of the assessee's appeals against the said penalty orders, the ITO required the assessee to pay the outstanding amounts of penalty. By orders made on 17th Oct., 1974, holding that the assessee had committed default in payment of the outstanding demands, he levied penalties of Rs. 1,000, Rs. 2,000 and Rs. 2,000, respectively, for the three assessment years, in exercise of his power under S. 271(1) of the Act. The assessee's appeals to the AAC failed. The Tribunal noticing that the expression 'tax' has been separately defined in S. 2(43) of the Act, and also relying on a judgment of the Calcutta High Court in Shreenivas & Sons vs. ITO (1974) 96 ITR 562 (Cal), cancelled the penalties levied under S. 221(1) of the Act. On the application of the Department, the aforesaid question has been referred by the Tribunal to this Court.

(3.) READING the two provisions together, it is clear that, unless the assessee is or is deemed to be in default in making a payment of 'tax', as defined in S. 2(43) of the Act, which means that he is in default or in deemed default in payment of income tax chargeable under the provisions of the Act or super tax chargeable under the provisions of the Act, depending upon the assessment year in question, there could be no levy of penalty under S. 221(1).