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 1950-51 - Assessee was unregistered firm in which petitioner was a partner along with another person namely, 'G' - ITO issued notice to 'G' for payment of tax due - As there was no response, ITO imposed penalty of Rs. 1,000 on firm - Thereupon, petitioner was served with notice of demand to remit amount alleged to be tax due - Petitioner filed appeal before AAC and pending appeal filed an application before IAC to stay collection of tax - Petitioner was directed to remit a part of tax due pending disposal of appeal - Petitioner complied with said direction - Subsequently, as order of assessment was stayed, petitioner applied for refund - ITO after adjusting Rs. 1,000 towards penalty levied for non-payment of tax in time, remitted balance amount - Whether, on facts, ITO was not right in adjusting amount of penalty against amount deposited by petitioner - Held, yes FACTS The assessee was an unregistered firm in which petitioner was a partner along with another person namely 'G'. The ITO issued a notice to 'G' for payment of tax due. As there was no response, the ITO imposed a penalty of Rs. 1,000 on firm. Thereupon, the petitioner was served with a notice of demand by the respondent ITO to remit amount alleged to be tax due. The Petitioner filed an appeal and also applied to IAC to stay the collection of the tax covered by the demand till the disposal of the appeal. The IAC issued a letter which directed the petitioner to remit a part of tax due pending final disposal of the petition. The petitioner complied with this direction. In the meantime 'G' had also filed an appeal from the order of assessment and the two appeals were heard and disposed of together, setting aside the assessment and directing re-assessment after proper enquiry. As the order of assessment was set aside in appeal, the petitioner applied for refund of sum paid by him pursuant to the order of the IAC. The first respondent passed an order stating that a sum of Rs. 1,000 out of the amount remitted by…

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