Summary
Sub-section (2) of 9. 220 of the Income-tax Act. 1961 makes an assessee liable to pay simple interest at 4% p.a. if the amount specified in any notice of demand under s. 156 was not paid within the period limited under sub-s. (1).
Sub-section (3) states that without prejudice to the provisions contained in sub-s. (2) on an application made by the assessee before the expiry of the due date under sub-s.(1) the Income-tax officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.Out of a large sum of money which became payable by the respondent as income-tax, half the amount was paid and in respect of the remaining half which was allowed to be paid in three instalments, the respondent had under taken to pay interest at the rate of 5% p.a. even though s. 220(2) of the Income-tax Act, 1961 prescribed 4% as the rate of interest payable on such arrears. The Income-tax Officer accepted the term. By the Finance Act, 1965 the rate of interest payable under this section was raised from 4% to 6% p.a. On receipt of a notice from the Income-tax officer, that on the unpaid balance of the tax arrears the company was liable to pay interest at 6% p.a., the respondent moved the high Court contending that it was not open to the Income-tax officer to vary the rate from 5% to 6% even in spite of the change made by the Finance Act, 1965, in that a vested right could not be taken away by a statute which did not apply retrospectively. The High Court allowed the writ petition.On appeal to this Court it was contended by the respondent that sub-ss. (2) and (3) of s. 220 were independent provisions which operated in fields of their own.Allowing the appeal to this Court,^HELD: (1) Sub-sections (2) and (3) form part of the same section namely, s. 220 and are therefore closely allied to each other. It is true that the two sub-sections deal with separate issues but the non-obstante clause of sub s.(3) clearly restricts the order passed under sub-s. (3) to the conditions mentioned in sub-s. (2) of s. 220 of the Act.[860 B](2) It is the Finance Act which fixes the rate of interest payable under sub-s. (2) of s. 220. It is not within the competence of the Income-tax officer to vary the rate of interest fixed by the Finance Act under subs. (2) of s. 220 from time to time. [860C-D]Esthuri Aswathaiah v. Commissioner of Income fax Mysore 60 I.T.R. 411 and 416, followed.(3) Sub-section (3) of s. 220 does not empower the Income-tax officer to enter into any indefeasible settlement with the assessee or to clothe the Income tax officer with any such ,power so as to vary the statutory inhibition contained 856in sub-s. (2). Any order which is passed under sub-s. (3) would be subject to the rate of interest mentioned in sub-s. (2) and as soon as the rate mentioned in sub-s. (2) is varied or enhanced by the legislature it would have to be read into sub-s. (2) from the date of the amendment and any order passed under sub-s. (3 ) would be subject to the rate so fixed. If this is not the position then the order passed under sub-s. (3) being prejudicial to sub-s. (2) becomes illegal and invalid and the Income-tax officer exceeds the limits of his jurisdiction in passing such an order. [860F-H]In the instant case there was no question of the Finance Act operating retrospectively nor was there any question of the Finance Act taking away a vested right which had accrued to the assessee because the order of the Income- tax officer under sub-s. (3) of s. 220 does not amount to any final settlement or agreement. The notice had merely given effect to the legal provisions of the Finance Act.[861 B](4) In is manifest that the Income-tax officer could not have passed any order against the statutory provisions of sub-s. ( 2) of s. 220 either with or without the consent of' the assessee. Even the order of the Income-tax officer accepting the Offer. Of the assesse to pay interest at the rate of 5% p.a. was legally invalid because if the rate of interest fixed by the statute was 4% the parties could not be allowed to contract out of the statute. The only relief which the assessee could get was to pay interest at 4% p.a. prior to the Finance Act, 1965 and at 6% after 1st April, 1965. [861D-E]Biswanath Ghosh v. Income-tax officer, Ward, B. and Another 95 I.T.R. 372, 374, approved.See the full content of this document
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Income Tax Officer 'a' Ward, Indore VS. Gwallor Rayon Silk Manufacturing (Weaving) Co.Ltd., Birlagr
PETITIONER: INCOME TAX OFFICER 'A' WARD, INDORE Vs.RESPONDENT: GWALlOR RAYON SILK MANUFACTURING (WEAVING) co.LTD., BIRLAGRADATE OF JUDGMENT18/09/1975BENCH: FAZALALI, SYED MURTAZABENCH: FAZALALI, SYED MURTAZAKRISHNAIYER, V.R.CITATION: 1976 AIR 43 1976 SCR (1) 855ACT: Income tax Act, 1961-Section 220(2) and (3)-Scope of- Rate of interest on arrears of tax fixed by the Act-Assessee agrees to pay higher rate of interest-Whether Income tax officer had power to accept-Upward revision of rate of interest by the Finance Act-If assessee could claim to pay only the rate agreed but not the rate fixed by the Finance Act.JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 76 to 80 of 1971 From the Judgment and orders dated the 17th October, 1968 of the Madhya Pradesh High Court in Misc. Petitions No.277, 279 to 282 of 1966.G. C. Sharma, P. L. Juneja and S. P. Nayar, for the appellant.S, Chowdhury...
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