TMI Blog1974 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Act, there is no scope for any argument that " interest " is an " additional tax ". Accordingly. I hold that no penalty can be imposed for default in payment of interest under sub-section (1) of section 221 of the Act. - In the result, this rule is made absolute in part. The impugned notice of penalty under section 221(1) of the Income-tax Act, 1961, dated April 2, 1971, which is annexure " F " to the petition, must be quashed by a writ of mandamus. - - - - - Dated:- 10-1-1974 - Judge(s) : AMIYA KUMAR MUKHERJEE. JUDGMENT AMIYA KUMAR MOOKERJI J.-The petitioner is a partnership firm registered under the Indian Partnership Act and also under the Income-tax Act, 1961. The petitioner was the owner of Amritanagar Selected Colli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asansol, by which the Income-tax Officer charged the petitioner with interest amounting to Rs. 44,463 under section 220(2) of the Act. A notice of demand dated November 25, 1970, was issued requiring the petitioner to pay a sum of Rs. 44,463 within 35 days of the receipt of the said notice of demand. By a letter dated the 14th December, 1970, the petitioner informed the Income-tax Officer that the voluntary disclosure was duly accepted by the Commissioner of Income-tax and in settling the liability of tax under the said voluntary disclosure and by allowing the petitioner to pay the said demand by instalments, the department did not stipulate levy of any further amount on account of interest under any provision of the Act and accordingly le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke section 220(2) of the Income-tax Act, 1961, in respect of the amount of tax payable under the said Finance Act and the provisions contained in section 220(2) of the said Act can be invoked only by the Commissioner of Income-tax and none else. Provisions of Chapter XVII-D of the Income-tax Act, 1961, shall be applicable in a voluntary disclosure, under sub-section (7)(a) of section 24 of the Finance (No. 2) Act of 1965. Payment of interest is provided in sub-section (2) of section 220 of the Act, which is in Chapter XVII-D. Under sub-section (3) of section 220, discretion has been conferred upon the Income-tax Officer to allow payment by instalments which is, however, without prejudice to the provisions contained in sub-section (2) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proper authority to pass an order for payment of interest under sub-section (2) of section 220 of the Act. It is next contended by Mr. Pal that under section 24(7)(a) of the Finance (No. 2) Act of 1965, the Income-tax Officer was competent to issue the demand notice under section 156 of the Income-tax Act only in respect of the sum payable by the petitioner as determined by the Commissioner under sub-section (3) of section 24 of the said Finance Act. Once that power is exhausted by issuing a demand notice for the tax under section 156, there is no provision under the said Finance Act to issue a further demand notice under section 156 for payment of interest. The point seems to be of substance at first sight, but on careful examinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 221(1) of the Act. The last point raised by Mr. Pal is an interesting question of law which requires careful consideration. In C. A. Abraham v. Income-tax Officer the Supreme Court observed that the liability to pay additional tax which is designated as penalty is imposed in view of the dishonest and contumacious conduct of the assessee, but it is imposed as apart of the machinery for assessment of tax liability. In Bhor Industries Ltd. v. Commissioner of Income-tax one of the questions for consideration before the Supreme Court was, whether in making an order under section 23A of the Indian Income-tax Act, 1922, in respect of the profits and gains of the company concerned, the assessable income of the previous year concerned wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act, and in relation to any other assessment year, income-tax and super tax chargeable under the provisions of this Act prior to the aforesaid date. Mr. Balai Lal Pal, appearing on behalf of the revenue, sought to urge that under sub-section (4) of section 220, the assessee shall be deemed to be in default if the amount is not paid under sub-section (3) of section 220 of the Act and imposition of penalty is a part of the " machinery for assessment of tax liability " as observed by the Supreme Court in Abraham's case referred to above. The interest, according to Mr. Pal, is an additional tax, which is payable by the assessee, because certain concessions were given to him by allowing him to pay tax by instalments. So, for non-payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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