Shah, J. - (1.) These are two appeals with certificates or fitness granted by the High Court of Judicature at Madras against certain orders passed in Writ Petitions under Art. 226 of the Constitution.
(2.) one Ramaswami Iyer- father of the respondent- was assessed to income-tax in the status of a Hindu Undivided Family. Ramaswami Iyer died in 1949 and the respondent M.R. Vidyasagar became the manager of the family. The family was a partner through its manager in a firm styled The Madura Knitting Company", and the share in the profits of the partnership which was registered under the Indian Income-tax Act was the principal source of its assessable income. Under S.18A of the Indian Income-tax Act, the Hindu undivided family was liable to pay advance tax for each of the assessment years 1946- 47, 1947-48 and 1948-49 The Income-tax of Officer, Madura, issued notices under S.18A (1) of the Indian Income-tax Act for payment of advance tax on the basis of the preceding year's income. It was open to the assessee to submit a revised estimate of his income under S. 18A (2) in respect of the year in question and Ramaswami Iyer- who was at the material time the manager availed himself of the option to submit a revised estimate and estimated the income for each of the assessment years 1946-47 and 1948-49 at Rs. 45,000/- The assessments of these two years were completed respectively on November 28, 1950 and February 29, 1951, and the income received from the Madura Knitting Company was included in the assessments under S.23 (5) The Income-tax Officer assessed the total income of the Hindy undivided family for the year 1946- 47 at Rs. 1,01,335/- and for the year 1948-49 at Rs. 3,10,697/-. As the total income assessed far exceeded the estimate of Rs. 45,000/- submitted by the manager of the assessee family, the Income-tax Officer in making the assessment ordered the respondent to pay Rs. 6,999/12/- and Rs. 36,687/- respectively for the assessment years 1946-47 and 1948-49 as interest In appeals against the orders of assessment by the Madura Knitting Company, by order dated March 12, 1954 the Income-tax Appellate Tribunal reduced the income of the firm and on that basis reduced the share of the family in the income of the firm for the year 1946-47 Rs. 83,335/- and for the year 1948-49 to Rs. 2,83,868/-. The Income-tax Officer, Mudura in giving effect to the orders passed by the Appellate Tribunal under the 3rd proviso to S. 18A (6) reduced the interest to Rs. 4,358/- for the year 1946-47 and to Rs. 32,714/10/- for the year 1948-49, and called upon the respondent to pay the arrears of tax inclusive of interest so adjusted. The respondent then called upon the Income-tax Officer not to levy interest under S. 18A (6) submitting that the levy was illegal and unjustified, and in the alternative requested that the interest be waived under the power vested under the 5th proviso to S. 18A (6) which was added by S.13 of the Indian Income-tax (Amendment) Act 15 of 1953. The Income-tax Officer declined to accede to the request and the respondent's application to the Inspecting Assistant Commissioner for cancelling the levy of interest was also rejected. The respondent then moved two petitions (Nos. 743 and 748) under Art. 226 of the Constitution in the High Court of Judicature at Madras for writs cancelling the orders imposing liability for payment of interest, contending that the levy of penal interest was opposed to law and was prima facie, unjustified on the facts and circumstances of the case. The respondent submitted that the levy of interest under S.18A (6) was penal in character and could not be imposed upon the legal representative of the deceased manager who was not in any manner responsible for the original return field by the firm of which the manger was a partner. He also contended that the levy was not warranted by the provisions of the Indian Income-tax Act inasmuch as in respect of the assessment years in question the respondent was not the assessee, that the dealy in completing the assessment was not attributable either to the then manager of the family, Ramaswami Iyer or to himself and therefore, no liability for payment of interest could be imposed, and that in any event refusal to cancel the levy of interest was arbitrary and not based on any judicial exercise of discretion vested in the Income-tax Officer.
(3.) A Division Bench of the Madras High Court held that the provision imposing liability to pay interest under sub-s. (6) of S. 18A was not opposed to law and could be enforced against the legal representative of the deceased manager, who was a partner of the assessee firm. The High Court, however, was of the view that as the Income-tax Officer and the Inspecting Assistant Commissioner had failed to consider whether in the circumstances of the case the reduction or waiver of the interest was justified, it be ordered that the Income-tax Officer do decide whether the petitioner had made out a case for the exercise of the discretion vested in the Income-tax Officer to waive or reduce the interest under the powers conferred on him by the 5th proviso of cl.(6) of S.18A. Against that order with certificates of fitness these appeals are preferred by the Commissioner of Income-tax.;