Law:

Section:

Section 221(1), read with section 292B, of the income-tax act, 1961-Penalty-Payable when tax in default-ITO issued a composite notice, granting extension of time for payment of advance tax and also calling upon assessee to show cause why penalty should not be levied-On assessee's failure to pay tax, ito levied penalty-Whether a proper show-cause notice was issued to assessee under first proviso to section 221-Held, on facts, yes. Facts On the basis of provisional assessment for 1964-65, the ITO made a demand for advance tax for 1965-66, which was subsequently rectified, and a fresh notice of demand was issued to the assessee. However, before such rectification, no show-cause notice under section 154(3) was issued to the assessee. Later, the ITO issued a composite notice, granting extension of time for payment of advance tax and also calling upon the assessee to show cause why penalty should not be levied. As the assessee did not pay the advance tax on the basis of the rectified demand, the ITO levied penalty under section 221. On appeal, the AAC set aside the order of penalty on the grounds ( i) that no proper show-cause notice was issued before levy of penalty as contemplated under first proviso to section 221(1), and (ii ) that the advance tax demand was itself invalid as the rectification of advance tax demand had been done without any show-cause notice. On further appeal, the Tribunal confirmed the AAC's order on the first ground and, therefore, considered it unnecessary to give its decision on the second ground. On reference : Held In the instant case, the purport of the notice issued by the ITO was to extend the time for payment of advance tax and for giving an opportunity to the assessee to give reasons for non-payment of advance tax. Whether a show-cause notice, as contemplated by the first proviso to section 221(1), was issued as part of the order granting time for payment or separately, later on, the effect was the same as in both the cases, the assessee would be given an opportunity to show good and sufficient reason for the default in payment of the advance tax. Consequently, with regard to the first ground, the Tribunal was not justified in holding…

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