Compulsory deposit penalty not leviable where current income could not be ascertained under the statutory mechanism.

Penalty under the Compulsory Deposit Act could not be imposed where the assessee had not filed an advance-tax statement under section 209A of the Income-tax Act and no section 210 order had been made, because the statutory basis for ascertaining current income under section 4(3) was absent. The compulsory deposit scheme depended on ascertainable current income, and without the prescribed trigger for determining that income, the assessee could not be treated as in default for non-payment. The result was that penalty under section 10(3) was not leviable on the facts stated, even though the statutory machinery left a gap.

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Issues: Whether penalty under section 10(3) of the Compulsory Deposit Act was leviable where the assessees had not filed the advance-tax statement contemplated by section 209A of the Income-tax Act and, consequently, their current income for the relevant previous year could not be ascertained under section 4(3) of the Compulsory Deposit Act.

Analysis: The governing scheme made compulsory deposit depend on the assessee's current income, and section 4(3) linked the ascertainment of current income to the filing of a statement under section 209A(1)(a) of the Income-tax Act or to the alternative situations expressly mentioned in that provision. On the facts found, no advance-tax statement had been filed by the assessees and no order under section 210 of the Income-tax Act had been passed requiring advance tax. In that situation, the statutory basis for determining current income under section 4(3) was absent. The consequence was that the assessees could not be treated as being in default for non-payment of compulsory deposit, even though the result may have left a gap in the statutory machinery.

Conclusion: Penalty under section 10(3) of the Compulsory Deposit Act was not leviable, and the assessees were held not liable for compulsory deposit on the facts of the case.

Final Conclusion: The common order gave relief on the compulsory deposit penalty issue, while the connected appeals were disposed of in different directions as recorded in the operative part.

Ratio Decidendi: Where the statute makes liability to compulsory deposit dependent on ascertainable current income, and the statutory mechanism for its ascertainment is not triggered on the facts, no default can be fastened and penalty cannot be imposed.

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