1979 (3) TMI 39 - HC - Income Tax

Summary

Issues:
1. Whether penalty can be levied for default in payment of advance tax demanded under section 210 of the Income-tax Act, 1961?

Analysis:
The judgment delivered by the High Court of Bombay pertains to a reference under section 256(1) of the Income-tax Act, 1961, involving an assessee, Prakash Cotton Mills Private Ltd., for the assessment year 1966-67. The issue at hand revolves around the imposition of a penalty by the Income Tax Officer (ITO) on the assessee for failing to pay the first instalment of advance tax amounting to Rs. 8,33,988.65 by the due date of 1st June, 1965. The ITO issued a show cause notice under section 221(1) of the Act, and subsequently levied a penalty of Rs. 15,000 on 20th July, 1965, due to the default in payment. The assessee appealed to the Appellate Assistant Commissioner (AAC), challenging the penalty on various grounds, including the contention that the penalty was excessive. The AAC upheld the penalty, stating that the assessee had persisted in default for a significant period and that filing a "nil" estimate after the penalty order did not justify non-payment of the first instalment on time.

The matter was further appealed before the Income-tax Appellate Tribunal, where a new argument was raised by the assessee. The argument posited that default in payment of advance tax does not equate to default in payment of tax under section 221, thus rendering the penalty unjustified. The Tribunal rejected this argument, emphasizing that tax and advance tax are intertwined within the Act, and upheld the penalty. The Tribunal also referenced a judgment of the Mysore High Court under the Indian Income Tax Act, 1922, to support its decision. The High Court considered various judgments from different High Courts, including Allahabad, Gujarat, Kerala, and Andhra Pradesh, which all supported the view that penalty under section 221 can be levied for default in payment of advance tax demanded under section 210. The High Court concurred with the Tribunal's interpretation and upheld the penalty imposed on the assessee.

In conclusion, the High Court answered the referred question in the affirmative, affirming that a penalty can indeed be levied under section 221(1) of the Income-tax Act, 1961, upon an assessee who defaults in the payment of an instalment of advance tax demanded under section 210. The court aligned with the precedent set by various High Court judgments and upheld the penalty imposed on the assessee. No other points were raised in the reference, and the decision favored the Commissioner, with the assessee directed to pay the costs of the reference.