Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

1958 (11) TMI 2

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... an income of Rs. 4,494 for the accounting year 1947-48 being the previous year for the assessment year 1948-49 and an income of Rs. 31,646 for the accounting year 1948-49 being the previous year for the assessment year 1949-50. By orders dated August 25, 1949, the Income-tax Officer assessed the income for the assessment year 1948-49 at Rs. 6,277 and for the assessment year 1949-50 at Rs. 36,281. The correctness of these orders is not in question before us. We are concerned in these proceedings with the vires of an order, which the Income-tax Officer made on October 9, 1950, under section 28 read with sections 18A(3) and 18A(9) of the Act. It will be convenient to set out these provisions, so far as they are material for the purpose of this appeal. Section 18A(3) provides that : "Any person who has not hitherto been assessed shall, before the 15th day of March in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed six thousand rupees, send to the Income-tax Officer an estimate of the tax payable by him on that part of his income to which the provisions of section 18 do .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... " The Income-tax Officer held that as the respondent had failed to send an estimate of the tax on his income as provided in section 18A(3) he became liable to be proceeded against under section 28, and accordingly imposed a penalty of Rs. 40 for the year 1948-49 and Rs. 1,000 for the year 1949-50. On appeal, the Appellate Assistant Commissioner confirmed the order in so far as it imposed a penalty for the year 1948-49 but set it aside a regards the year 1949-50 on the ground that by reason of the assessment for the year 1948-49 the respondent ceased to be a new assessee for 1949-50, and that, in consequence, section 18A(3) had no application. Against the order cancelling the penalty for 1949-50, the Income-tax Officer preferred an appeal to the Appellate Tribunal, which disagreed with the view of the Appellate Assistant Commissioner that the respondent was no longer a new assessee within section 18A(3) of the Act, but held that the order of the Income-tax Officer imposing a penalty under section 28 was ultra vires, because that section would, in terms, apply only when a person failed to furnish the return when he was required so to do by notice under section 22 or section 34 of .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ilure to furnish an estimate as required by section 18A(3), because sub-section (1) of section 28 would apply only when a person failed to furnish the return when he had been required to do so by notice under section 22(1) or section 22(2) or section 34, or had failed to furnish it within the time allowed and in the manner required by the notice, and that there could be no such notice with reference to section 18A(3). Say the learned Judges : " In the first place, a person who fails to send an estimate under section 18A(3) cannot be said to have failed to furnish the return of his total income which he was required to furnish in response to a notice issued under section 22 or section 34 ; secondly, the said person cannot be said to have failed to furnish it within the time allowed and in the manner required by such notice, for estimates under section 18A(3) must be furnished before the 15th March in the financial year immediately preceding the year of assessment whereas the returns required by the notices under sections 22 and 34 can be furnished at later dates." With respect, the error in this reasoning lies in this that it fails to give due effect to the fiction contained i .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ting as the return under section 22 for purposes of section 28, and that that does not abrogate the other conditions laid down in that section on which alone action could be taken thereunder and penalty imposed, and one of those conditions is the issue of notice under section 22(1) or section 22(2). But it must be noted that section 18A(9)(b) does not merely say that an estimate under section 18A(3) shall be deemed to be a return. It enacts that the failure to send an estimate in accordance with section 18A(3) is to be deemed to be a failure to make a return. Now, there can be no failure to make a return, unless notice had been issued under section 22(1) or section 22(2) and there has been a default in complying with that notice. Therefore, the fiction that the failure to send an estimate is to be deemed to be a failure to send a return necessarily involves the fiction that notice had been issued under section 22, and that had not been complied with. It is a rule of interpretation well settled 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. The following oft-quoted observations o .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... urt will not stretch the terms of taxing Acts in order to improve on the efforts of Parliament and to stop gaps which are left open by the statutes. Tax avoidance is an evil, but it would be the beginning of much greater evils if the courts were to overstretch the language of the statute in order to subject to taxation people of whom they disapproved." These observations would be in point if the language of the enactment left us in any doubt as to what the Legislature meant. But can that be said of section 18A(9)(b) ? Its object avowedly is to assimilate the position of a person who has failed to send the estimate under section 18A(3) to that of a person who has failed to furnish the return under section 22, and that object is sought to be achieved by enacting the fiction which is contained in section 18A(9)(b). And if, on the principles laid down in East End Dwellings Co. Ltd. v. Finsbury Borough Council, the true effect of that fiction is that it imports that notice had been issued under section 22, then the conditions prescribed in section 28 of the Act are satisfied and penalty could be imposed under that section for failure to comply with section 18A(3), on the clear langua .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates