Law: Income Tax Act, 1922

Section: 46(1)

Law: Income Tax Act, 1961

Section: 221

Section 221 of the Income-tax Act, 1961 [Corresponding to section 46(1) of the Indian Income-tax Act, 1922] - Collection and recovery of tax - Penalty payable when tax in default - Assessment year 1953-54 - Whether correctness or otherwise of penalty order under section 46(1) has to be evaluated as on date of that order and not in light of subsequent event - Held, yes - Whether therefore, where assessee had filed revision petitions against penalties levied under section 46(1) before assessment was set aside in appeal, orders of Commissioner granting partial relief, were sustainable even though, before date of Commissioner's order, assessment had been set aside by AAC - Held, yes FACTS The petitioner, was a member of an association of persons, was directed to pay certain amount of income-tax on or before 30-6-1955, in respect of the assessment year 1953-54. On appeal, the AAC had set aside the assessment and directed the ITO to redo the same vide order dated 23-10-1956. However, the assessee paid only Rs. 1,000 on 30-6-1955, and he requested for permission to pay the balance in easy instalments. The ITO did not grant the request and asked the assessee to pay the balance before 30-7-1955. But no payment was made. Hence the ITO imposed a penalty of Rs. 788 on 22-10-1955. Later, concessions for clearing off the arrears in instalments were granted by the IAC. But the instalments were not kept up. Hence penalties, of Rs. 750 Rs. 1,500 and Rs. 100 had to be imposed by the ITO on 7-1-1956, 11-2-1956 and 14-9-1956, for assessee's defaults which were clear on all the occasions on which the penalties were levied. The assessee challenged the penalty orders before the Commissioner of Income-tax by revision petitions. The Commissioner, vide order dated 8-1-1957 granted some relief in respect of two penalties while he confirmed the other two despite the assessment having been set aside by the AAC. On petition, the assessee contended that the orders of the ITO under section 46(1) after he became aware of the filing of the appeal could not be sustained. HELD Sequence of events indicated that there was no failure to exercise the discretion under section 45 or any mal-exercise…

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