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TMI Blog1976 (3) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... plication no submissions were made regarding annexure "D" to the petition. The petitioner only confined his challenge to the notice issued under section 221(1) of the Income-tax Act, 1961, dated the 5th June, 1974. By the said notice the Income-tax Officer had intimated to the assessee that from his records it appeared that amounts of the sum of Rs. 18,880 for the assessment year 1955-56, of the sum of Rs. 15,203 for the assessment year 1957-58, and of the sum of Rs. 34,413 for the assessment year 1958-59, had remained outstanding. The petitioner was asked to show cause why penalty should not be levied under section 221 of the Income-tax Act, 1961. For this purpose, the petitioner was directed to appear or to send representation by 22nd Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no scope for imposition of any penalty. According to counsel for the petitioner, clause (j) of sub-section (2) of section 297 of the Income-tax Act, 1961, had saved recovery of tax, penalty and interest under the repealed Act, but in the absence of corresponding provision for interest as under section 220(2) of the 1961 Act in the repealed Act the demand for such interest when included in the notice under section 221(1) was illegal and bad. As I have indicated, outstanding demands for all these years on account of income-tax were Rs. 9,638, Rs. 15,203 and Rs. 33,488. While the notice under section 221(1) of the Act indicated different figures for the assessment years 1955-56 and 1958-59, for the assessment year 1955-56, the outstanding dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad, the entire notice should fail. In aid of this submission reliance was placed on the observations of the Privy Council in the case of Bennett & White (Calgary) Ltd. v. Municipal District of Sugar City (No.5) [1951] AC 786 (PC), and the observations of the Judicial Committee at page 816 of the report. In my opinion, the said observations of the Privy Council would not have any application to the facts of this case. It is not a case of separating the good or bad in the order of assessment as was the case before the Judicial Committee. It is a case where notice has been given to the assessee to show cause why penalty should not be imposed and in that notice it has been stated that it appeared to the department that certain sums had remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The main question is whether a proceeding for imposition of penalty is a proceeding for recovery of the sum payable under the Act. Penalty is, inter alia, for non-payment of tax. Penalty is a measure, inter alia, to ensure that taxes are paid. But penalty, in my opinion, is not a proceeding for recovery itself of the taxes. By imposing penalty you do not recover the tax. You help the collection of tax by deterring people from non-payment of tax. This is a means for compelling assessees or persons liable to pay tax ; but by imposing penalty the amount demanded as tax is not recovered as such. Counsel for the petitioner contended that there were three kinds of recovery proceedings one was by levying penalty under section 221(1) and the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court was made in the context of the provisions of that section. Reliance was placed on the observations of the Supreme Court at page 131 of the report where the court observed that when dues in the shape of money were to be realised by the process of law and not by voluntary payment, the element of coercion in varying degrees must necessarily be found at all stages in the mode of recovery of the money due. The court observed that coercive element perhaps in its severest form was the act of arrest in order to make the defaulter pay his dues. Penalty is a punishment for an offence committed ; the offence is non-payment of taxes. It helps payment of tax. But by the imposition of penalty, as I have indicated before, the taxes are not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty a proceeding for recovery of tax. Reliance was also placed on the observations of the Madras High Court in the case of General Commercial Corporation P. Ltd. v. Second Additional Income-tax Officer [1960] 40 ITR 506, 513 (Mad). The placement of section 221 of the Act also indicates that this is not a proceeding for recovery of tax. In the aforesaid view of the matter, the contention urged in support of this application that this proceeding for recovery of tax is barred by limitation because of the provision of section 231 of the Act cannot be accepted. It was, then, contended on behalf of the revenue that under section 231 as certain other proceedings had been taken, this proceeding would not in any event be barred. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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