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I.T.R. No. 556 of 1972, decided on 10th November, 1986.

---S. 46(1)--Penalty--Waiver of penalty by Tribunal--Default in payment of outstanding taxes by assessee--Imposition of penalty by Income-tax Officer--Commissioner granting stay in respect of 50 of outstanding ' demand till decision of appeal--Demand of 50 met by assessee--Income-tax Appellate Tribunal, held, was justified to waive the penalty for the reason that stay had been granted against the demand and penalty by the Commissioner on the terms, which were duly complied by assessee.

Mrs. Rashida Patel for Applicant.

Ali Athar for Respondent.

Date of hearing: 10th November, 1986.

--The question referred to us for our opinion in this case is as follows:

"Whether on the facts and in the circumstances of case the Income-tax Appellate Tribunal was justified in holding that the assessee was not in default on the date when penalty under section 46(1) of the Income-tax Act was imposed "

The brief facts, as given in the statement of the case, are that the respondent /assessee was in default in the payment of outstanding taxes and consequently the Income-tax Officer imposed a penalty of Rs.5,000 on 16-4-1969. In an appeal before the Tribunal it was argued that after the imposition of this penalty the respondent was granted stay by the Commissioner of Income-tax on 26-4-1969 and as a result thereof obtained stay in respect of 50 of the outstanding demand till the decision of the appeal. The assessee was thus required to pay only t) balance of 50% of the tax. It appears that the order dated 26-4-1971, passed by the Commissioner of Income-tax was complied with. Later on e Tribunal, by its judgment dated 29-1-1971, vacated the penalty imposed by the Assessing Officer under section 46 (1) of the Income-tax Act, 1922. In the circumstances, the present application under section 66 (1) of the Income-tax Act was moved by the department before the Tribunal, which has referred the aforesaid question for our opinion. We have heard Mrs. Rashida Patel, learned counsel for the applicant and Mr. Ali Athar, learned counsel for the respondent.

2. The facts; which are on record, require reframing of the question and accordingly we reframe the question as follows:

"Whether on the facts and in the circumstances of the case the Income-tax Tribunal was justified in waiving the penalty on the assessee "

From the statement of the case it is apparent that' on account of default in payment of outstanding taxes, the Income-tax Officer had imposed a penalty of Rs.5,000 on 16-4-1969. An order was passed by the Commissioner of Income-tax granting stay in respect of 50% of the outstanding demand till the decision of the appeal. As observed earlier, it appears that 50% of the outstanding demand was met and in respect of balance 50% there was a stay. In these circumstances, the Income-tax Tribunal waived the penalty. Apparently the penalty was waived for the reason that against the demand and penalty a stay had been granted by the Commissioner of Income-tax on terms, which terms were complied with by the assessee. We are of the view that the decision of the Tribunal in waiving the penalty was not unjustified and in the circumstances, the reframed question is answered in the affirmative

M.B.A. Question answered in the affirmative

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