1966 (9) TMI 14

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....1961. The notice required the petitioner to appear personally or through an authorised representative on November 24, 1965, or to send a written communication so as to reach the Income-tax Officer on or before that date. On November 23, 1965, the petitioner submitted an application to the Income-tax Officer. The subject of the application was stated as " Request for stay of disputed tax till decision in appeal ", and it was mentioned that an appeal was pending before the Appellate Assistant Commissioner of Income-tax wherein the petitioner expected full relief, that the assessment order was erroneous and that the financial position of the petitioner was not then very sound and he was not in a position to liquidate the demand. Upon these all....

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....be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default." Then follows section 220(6): " Where an assessee has presented an appeal under section 246 the Income-tax Officer may, in his discretion, and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. " The provision for imposing a penalty upon an assessee in default is enacted in section 221, sub-section (1) of which reads: " When an assessee is in default or is deemed to be in default in making a payment of tax....

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....ors and thereafter determine whether a penalty should be imposed and, if so, in what sum. While determining the question whether the assessee is in default or is deemed to be in default, the Income-tax Officer must consider not only whether the amount specified in the notice of demand has been paid within the time limited but also whether the assessee has presented an appeal and the circumstances of the case are such that the assessee should be treated as not being in default. This is so particularly when the assessee has presented an application under section 220(6) for being treated as not being in default. Whether the assessee should be treated as not being in default is a matter to be considered by the Income-tax Officer before he can d....