TMI Blog1972 (12) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the said section. However the tax was not paid before the said date. Subsequently, the petitioners offered to pay the said tax but the Commissioner of Income-tax declined to receive the same on the ground that the time for payment was long over. The petitioners thereafter moved the Central Board of Direct Taxes but it also declined to give any direction to the Commissioner of Income-tax to receive the said tax. The Commissioner thereafter issued directions to the assessing authority to proceed with the assessment of the firm as well as the partners taking into account the income disclosed in their voluntary returns. At that stage, the petitioners filed writ petitions before this court challenging the validity of the said directions. The said writ petitions were admitted and stay of the assessment proceedings had also been granted. Thereafter, the Finance (No. 2) Act of 1967 came to be passed and sections 1 and 46 of that Act are as under : " 1. Short title commencement-(1) This Act may be called the Finance (No. 2) Act, 1967. (2) Save as otherwise provided in this Act, sections 2 to 36 and 44 to 46 shall be deemed to have come into force on the 1st day of April, 1967." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t April, 1967. The petitioners also contend that, if the said section 46 had not been enacted, the assessment proceedings in the petitioners' case would have been proceeded with and the amount disclosed voluntarily under section 68 of the Finance Act of 1965 would have been included in the regular assessment and interest would have been reckoned only from the date on which the notice of demand under section 156 of the Income-tax Act is served on the petitioners in pursuance of such assessment order and that, in such a case, the petitioners would not have been liable to pay interest in any event for the period from December 1, 1965, to March 31, 1967. The petitioners further contended that proceedings for recovery of the tax due on the amount voluntarily disclosed under section 68 of the Finance Act, 1965, could not have been initiated prior to March 31, 1967, when section 46 of the Finance (No. 2) Act, 1967, came into force and interest also could not have been recovered from the petitioners for the period prior to March 31, 1967. In substance, what the petitioners contend is that section 46 of the Finance (No. 2) Act of 1967, which came into force on April 1, 1967, cannot be invok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anterior to that date. The question is whether this contention is tenable. On a due consideration of the matter, we are of the view that the petitioner's contention is not tenable. As conceded by the learned counsel for the petitioners, if section 46 has been brought into force on August 5, 1967, the date of the commencement of the Act, interest can be charged for the anterior period. The fact that section 46 has been brought into force from April 1, 1967, the beginning of the financial year, instead of on August 5, 1967, cannot be taken to curtail its operation as suggested by the petitioners. It is true that the section has not been given retrospective effect for any period anterior to April 1, 1967. But, that will be so even if it came into force on August 5, 1967. If such a construction as is suggested by the petitioner is adopted, it will practically defeat the very object of bringing in the deeming clause in section 46. It is a well-settled rule of interpretation that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate and that a construction which defeats the very object sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the amounts specified in the demand notice issued under section 156 is not paid within the period referred to in sub-section(1), the assessee shall be liable to pay simple interest from the date of default. It is, therefore, clear that the amount of tax due by the petitioners on the basis of their voluntary disclosure having been deemed to be tax due from them on November 30, 1965, under a notice of demand issued under section 156, the application of section 220(2) is automatic and there is no question of limiting the interest payable under section 220(2) to April 1, 1967. In Union of India Madan Gopal Kabra a somewhat similar question was considered by the Supreme Court. The Income-tax Act of 1922 was not made applicable to the former State of Rajasthan. By section 2 of the Finance Act of 1950, a charge of income-tax and super-tax was levied at specified rate "for the year beginning on the first day of April, 1950" and it was made applicable to the whole of India except the State of Jammu and Kashmir. The assessee, a person carrying on business in Rajasthan, filed a writ of mandamus for a direction to the Union of India not to take any action under the Indian Income-tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to pursue this aspect of the matter further as we have held that Parliament has the power to make retroactive laws." The intention of the legislature in introducing section 46 has been made clear in the Memorandum explaining the provisions in the Finance (No. 2) Bill, 1967. Setting out the necessity for a provision like section 46, it is stated that in view of certain difficulties felt in the operation of the scheme in section 68 of the Finance Act of 1965 for voluntary declaration of unaccounted income, it is proposed to make the following provisions : " (i) Any amount of tax on the declared income remaining outstanding on the date immediately following the expiry of the above-mentioned period of six months will be deemed to be tax due from the declarant under the provisions of the Income-tax Act and will be recoverable from the declarant in the same manner as any other arrear income-tax demand. Accordingly, the declarant will also be liable to pay simple interest at 6 per cent. per annum, under the terms of section 220(2) of the Income-tax Act, for the period of default in the payment of the arrear tax, and also be liable for the imposition of a penalty under section 221 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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