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TMI Blog1972 (10) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... artmental authorities with reference to the assessee's application dated the 26th of July, 1963, the penalties levied under section 221(1) of the Income-tax Act, 1961, for the assessment years 1953-54, 1958-59, 1959-60 and 1961-62 were valid?" In order to appreciate the scope of this question, it is necessary to refer briefly to the material facts that gave rise to this question. The assessee is a registered firm carrying on business in hosiery goods. Its assessments for the assessment years 1950-51 to 1961-62 were reopened. The reassessments were completed by the Income-tax Officer on June 6, 1963, resulting in a total demand of tax amounting to Rs. 10,26,276. The demand notices for the years in question were served on the assessee on Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee preferred further appeals the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner. Pending the appeals before the Income-tax Appellate Tribunal, the Income-tax Officer issued notices under section 221(1) of the Act calling upon the assessee to show cause as to why penalty should not be levied on it for the arrears of tax due and payable by it. On receipt of the notices dated October 14, 1965, the assessee, by his letter dated October 31, 1965, informed the Income-tax Officer that it had already paid Rs. 1,25,000 and had also offered adequate security in accordance with the order of the Income-tax Officer and the stay granted to it being until the appeals were finally disposed of, the proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders were cancelled and the amounts of penalty were directed to be refunded if they were already paid. Hence, this reference at the request of the Commissioner of Income-tax. Mr. P. Rama Rao, the learned counsel for the income-tax department, contended that the Tribunal has erred in law in interpreting the scope of the order passed by the Income-tax Officer on October 8, 1963, permitting the assessee to pay Rs. 1,25,000 by two instalments of Rs. 50,000 and Rs. 75,000 and to furnish adequate security for the balance of the amount. He further urged that the very scope of the order passed by the Income-tax Officer under section 220(6) of the Act being only till the disposal of the appeals before the Appellate Assistant Commissioner, any order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Assistant Commissioner. The Income-tax Officer is not bound to exercise his discretion in not treating an assessee as a defaulter, after the disposal of the appeals before the Appellate Assistant Commissioner. The view expressed by the Income-tax Appellate Tribunal in construing the order of the Income-tax Officer dated October 8, 1963, must be held to be wrong for reasons more than one. Firstly, the order of the Income-tax Officer which is the material one for construing the rights of the parties arising thereunder does not indicate that the order was effective or would be in force beyond the disposal of the appeals before the Appellate Assistant Commissioner. If nothing is stated in the order, it must be construed to be one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sposed of by the Appellate Assistant Commissioner". There may be cases where the Appellate Assistant Commissioner calls for findings or reports from the Income-tax Officer in respect of certain items of assessment. There may also be cases where the orders of the Income-tax Officer are set aside and the matters remanded to the Income-tax Officer for further enquiry. The stay granted in such circumstances should be construed to be operative only till the disposal of the appeals by the Appellate Assistant Commissioner finally, but, by no stretch of imagination, it should be interpreted as to be operative till the disposal of the appeals by the Appellate Tribunal finally. Thirdly, no appeals were pending on the date of the application before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not filed by the assessee under that provision. Indisputably, the assessee as well as the departmental authorities proceeded before the Tribunal that the application was only under section 220(6). As a fact, the assessee did not prefer the application under sub-section (3) to section 220. We may add that no question has been referred for our opinion as to whether the application by the assessee was under section 220(3) or not. Even assuming that the assessee can take the aid of section 220(3), we are of the firm view that the assessee cannot succeed in this reference. Sub-section (3) to section 220 empowers the Income-tax Officer to extend the time for payment or permit the payment by instalments on such conditions as he may think fit t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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