Law:

Section:

Section 220 of the Income-tax Act, 1961 - Collection and recovery of tax - When tax payable and when assessee deemed in default - Assessee's assessment was completed and a notice was issued to him to pay tax - Assessee filed appeal against assessment order - During pendency of appeal, a notice was issued by ITO for imposition of penalty - Notice required assessee to appear personally or through authorised representative or to sent written communication so as to reach ITO on or before date fixed - A day before date of hearing, assessee submitted an application to ITO to stay penalty proceedings till disposal of appeal and not to treat him in default till then - ITO did not dispose of said application before passing order of penalty - Whether omission of ITO to dispose of application filed by assessee vitiated penalty order - Held, yes FACTS The assessee was assessed to income tax for the relevant assessment year. A notice of demand was issued to the assessee to pay tax. The assessee filed an appeal against the assessment order. During the pendency of the appeal, a notice was issued by the ITO, to the assessee for imposition of penalty. The notice required the assessee to appear personally or through authorised representative or to sent written communication so as to reach to the ITO on or before the date fixed. A day before the date of hearing the assessee had submitted an application to the ITO to stay the penalty proceedings till the decision in the appeal and not to treat the assessee in default till that period. The ITO without disposing of the assessee's application, passed the penalty order. On writ: HELD Before the ITO can impose a penalty under section 221, he must determine whether the assessee is in default or is deemed to be in default in making payment of tax. He is required by the proviso to section 221(1) to give a reasonable opportunity to the assessee of being heard before levying any such penalty. The assessee may show that he is not in default because he has paid the amount specified in the notice of demand and in this connection may establish that the records upon which the ITO relies for coming to the prima facieconclusion that the assessee…

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