Amiva Kumar Mookerji, J. - (1.) The petitioner is a partnership firm registered under the Indian Partnership Act and also under the Income-tax Act, 1961. The petitioner was the owner of Amritanagar Selected Colliery situated at Ranigunj. By a declaration dated December 4, 1965, the petitioner made a voluntary disclosure under Sub-section (3) of Section 24 of the Finance (No. 2) Act of 1965, declaring therein a sum of Rs. 7,23,274 as the undisclosed income of the petitioner for the assessment years 1963-64 and 1964-65, before respondent No. 2, Additional Commissioner of Income-tax, West Bengal II. The said disclosure was accepted by the Commissioner of Income-tax with slight modification of the amount disclosed and on receipt of the said information, the Income-tax Officer served upon the petitioner a demand notice under Section 156 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). on January 13, 1966, for Rs. 4,12,677.80 requiring the petitioner to pay the whole of the aforesaid amount within 35 days of the service of the said notice. The petitioner paid Rs. 41,267 being 10 per cent. of the total demand and made a written prayer on January 17, 1965, for paying the balance by instalments, and specifying therein also the securities the petitioner wanted to pledge. On being informed of the Commissioner of Income-tax's approval to the aforesaid scheme, the Income-tax Officer directed the petitioner to pay the balance according to the scheme approved. The petitioner paid the last instalment granted on January 4, 1969, thereby satisfying fully the original demand of tax raised. Thereafter, on November 25, 1970, an order was passed by the Income-tax Officer, "B" Ward, Asansol, by which the Income-tax Officer charged the petitioner with interest amounting to Rs. 44,463 under Section 220(2) of the Act. A notice of demand dated November 25, 1970, was issued requiring the petitioner to pay a sum of Rs. 44,463 within 35 days of the receipt of the said notice of demand. By a letter dated the 14th December, 1970, the petitioner informed the Income-tax Officer that the voluntary disclosure was duly accepted by the Commissioner of Income-tax and in settling the liability of tax under the said voluntary disclosure and by allowing the petitioner to pay the said demand by instalments, the department did not stipulate levy of any further amount on account of interest under any provision of the Act and accordingly levy of interest under Section 220(2) of the Act was unjustified. Thereafter, on January 6, 1971, the petitioner made an application under Section 264 of the Act before the Commissioner of Income-tax against the said order of the Income-tax Officer dated November 25, 1970. By an order dated March 3, 1971, the Additional Commissioner of Income-tax, West Bengal II, rejected the petitioner's said application. The said order was communicated to the petitioner by a letter, dated March 24, 1971. Thereafter, the petitioner received a notice dated April 2, 1971, issued under Section 221(1) of the Act by the Income-tax Officer, whereby the said Income-tax Officer asked the petitioner to show cause why a penalty should not be levied under the said section for not paying the said amount of interest amounting to Rs. 44,463 under Sections 220(3} of the Act. The petitioner being aggrieved by the said notice of demand dated November 25, 1970, passed under Section 220(2) of the Act, the order of the Additional Commissioner of Income-tax dated March 3, 1971, passed under Section 264 of the Act, and the notice dated April 2, 1971, passed under Section 221(1) of the Act, moved this court in an application under article 226 of the Constitution and obtained the present rule.
(2.) Mr. Pronob Pal, appearing on behalf of the petitioner in support of the rule, contends that under Section 24(7)(a) of the Finance (No. 2) Act of 1965 the Income-tax Officer has no power, authority and/or jurisdiction to invoke Section 220(2) of the Income-tax Act, 1961, in respect of the amount of tax payable under the said Finance Act and the provisions contained in Section 220(2) of the said Act can be invoked only by the Commissioner of Income-tax and none else.
(3.) Provisions of Chapter XVII-D of the Income-tax Act, 1961, shall be applicable in a voluntary disclosure, under Sub-section (7)(a) of Section 24 of the Finance (No. 2) Act of 1965. Payment of interest is provided in subsection (2) of Section 220 of the Act, which is in Chapter XVII-D. Under Sub-section (3) of Section 220, discretion has been conferred upon the Income-tax Officer to allow payment by instalments which is, however, without prejudice to the provisions contained in Sub-section (2) of Section 220. Therefore, it follows that in the case of payment by instalments, interest is required to be paid under proviso 2 to Sub-section (7)(a) of Section 24 of the Finance No. 2 Act of 1965, and certain conditions have been laid down and unless those conditions are fulfilled, the Income-tax Officer has no authority to grant any instalment to the assessee under Sub-section (3) of Section 220 of the Act. There is no provision in the Finance (No, 2) Act of 1965 by which the power has been conferred upon the Commissioner of Income-tax to grant any instalment, but by virtue of the deeming clause as provided in the proviso to Sub-section (7)(a) of Section 24 of the Finance (No. 2) Act of 1965, the Income-tax Officer shall be deemed to authorise to extend the time limit for payment of the tax due or allowing payment in instalments unless the conditions laid down in the said proviso are fulfilled. It is not disputed in the instant case that the entire amount specified in the demand notice under Section 156 of the Act had not been paid within 35 days of the service of the notice and the petitioner paid the amount of tax by instalments. That being so, such instalments were deemed to have been granted under Sub-section (3) of Section 220 of the Act and as the provisions of the said section are without prejudice to the provisions contained in Sub-section (2) of Section 220, in my opinion, the petitioner cannot avoid its liability of payment of interest and the Income-tax Officer is the proper authority to pass an order for payment of interest under Sub-section (2) of Section 220 of the Act.;