Subramonian Poti, J. -
(1.) THE petitioner in O.P. No. 2887 of 1972 is a partner of a firm, M/s. Vijaya Oil Mills, Alleppey, which firm is the petitioner in O.P. No. 2934 of 1972. THE question arising for decision in both these petitions is the same. It is about the propriety of imposition of penalty against the petitioners for default in payment of advance tax payable under the Income-tax Act, 1961. A notice of demand under Section 156 of the Income-tax Act, 1961, was served on the petitioner in O.P. No. 2934 of 1972 on June 2, 1969, for payment of a sum of Rs. 43,540. THE demand was payable under Section 220 of the Act. Since payment was not made, a penalty of Rs. 2,000 was imposed by exhibit P-1 order. A similar demand notice for payment of Rs. 26,962 was served on the petitioner in O.P. No. 2887 of 1972 and since such payment was not made a penalty of Rs. 1,000 was imposed. THEse orders were confirmed in appeal by the Appellate Assistant Commissioner of Income-tax. THE orders are exhibit P-2 in the two petitions. Revisions were filed before the Commissioner of Income-tax. Kerala, who by the (c)rders marked as exhibit P-4 in both the cases dismissed the revisions. THEse orders are challenged by the petitioner in these petitions.
(2.) THREE contentions by way of challenge to the orders of imposition of penalty were urged before the Commissioner of Income-tax as seen from exhibit P-3 and these three contentions are urged before this court too.
The assessment order relacing to which the demand for payment of advance tax was made concerned the year 1970-71. Section 221(1) of the Income-tax Act, 1961, as it then stood read as follows :
"221. (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under Sub-section (2) of Section 220, be liable to pay by of penalty, an amount which, in the case of a continuing default, may be increased from time to time, so, however, that the total amount of penalty does not exceed the amount of tax in arrears :
Provided that before levying any such penalty the assessee shall be given a reasonable opportunity of being heard. "
This was amended by the Taxation Laws (Amendment) Act, 1970. Section 38 of the said Act substituted for the origional Sub-section (1) of Section 221 of the Income-tax Act, the following sub-section :
" (1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under Sub-section (2) of Section 220, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, and in the case of a continuing default, such further amount or amounts as the Income-tax Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears :
Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard :
Provided further that where the Income-tax Officer is satisfied that the default was for good and sufficient reasons, no penalty shall be levied under this section. "
(3.) THIS amendment came into force with effect from April 1, 1971, and, therefore, does not cover the cases before me.
The case of the petitioners in these petitions is that advance tax is not a " tax " within the meaning of Section 221 of the Income-tax Act and, therefore, where the assessee is in default in making payment of advance tax he cannot be subjected to the imposition of a penalty in exercise of the power under Section 321(1) of the Act. It is also contended that as the section stood prior to its amendment the authority who could impose the penalty is not specified and, therefore, the Income-tax Officer who passed the orders could not have assumed the authority to pass such orders. The 3rd and last contention of the petitioners concerns the nature of the offence for which the penalty is sought to be imposed. According to them mens rea must necessarily be found to be a requirement of the offence under Section 221 of the Income-tax Act, 1961, and unless it is found, there is no justification for imposing any penalty against the petitioners. None of these contentions found acceptance with the Commissioner of Income-tax.;