COMMISSIONER OF INCOME TAX Vs. SREERAMA AND CO

JUDGEMENT

(1.) THE question referred to us by the Tribunal under Section 256(1) of the Income-tax Act for our decision is:

(2.) THE facts giving rise to this reference are these. THE assessee was served with a notice of demand under Section 156 of the Act for the year 1969-70 for payment of advance tax of Rs. 54,910. That was on August 21, 1968. He was asked to pay the advance tax in three instalments on or before September 1, 1968, December 1, 1968, and March 1, 1969. THE assessee defaulted in payment of the first and second instalments. THEn a show-cause notice was issued by the Income-tax Officer proposing to levy penalty and, thereafter, a penalty of Rs. 7,340 was imposed under Section 221(1) of the Act by his order dated March 7, 1969. THE assessee preferred an appeal to the Appellate Assistant Commissioner contending that on account of financial difficulties he could not pay the advance tax in time and as and when he was able to pay he was paying the taxes. While agreeing with the plea of the assessee the Appellate Assistant Commissioner found him technically guilty of default. In that view he reduced the penalty to Rs. 3,660. THE assessee then preferred a second appeal to the Appellate Tribunal contending that no penalty can be levied for non-payment of advance tax. Alternatively, it was contended that the penalty levied was excessive. THE Appellate Tribunal following its earlier order in another appeal held that no penalty is leviable for non-payment of advance tax under Section 221(1) of the Act and set aside the penalty. THEn the Commissioner moved the Tribunal for reference of the question of law raised by him and it has been accordingly referred to this court.

(3.) SUB-section (2) speaks of any notice of demand so as to take in every kind of notice issued under Section 156. It is, however, argued that no interest is payable on advance tax as provided under SUB-section (2) of Section 220, but that itself will not determine the question. "Tax" has been defined in Clause (43) of Section 2 and it reads :