Case: The Commissioner Of Income-Tax, West Bengal I,Calcutta Vs. M/S. Vegetables Products Ltd

(a) (i) is accepted as correct, the result would be that the advance tax paid or taxes deducted at the source cannot be taken into consideration in determining the penalty payable. If that be true, the Counsel urged that even if the assessee had paid more tax than he need have paid, but had not submitted his return within the time fixed, he would be liable to pay penalty on the entire amount assessed. According to them the law cannot be presumed to be so harsh as that.6. There is no doubt that the acceptance of one or the other interpretation sought to be placed on Section 271 (1) (a) (i) by the parties would lead to some inconvenient result, but the duty of the Court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and removel the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognised by this Court in several of its decisions. Hence all that we have to see is what is the true effect of the language employed in S. 271 (1) (a) (i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty.7. Let us now read Section 271 (1) (a) (i). The section to the extent material for our present purpose reads :"If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person -(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish..........by notice given under sub-section (2) of Section 139..............or has without reasonable cause failed to furnish it within the time allowed and in the manner required........by such notice ..........he may direct that such person shall pay by way of penalty,-(i) in the cases referred to in clause (a),in addition to the amount of the tax, if any, payable by hima sum equal to two per cent,of the taxfor every month during which the default continued, but not exceeding in the aggregate fifty per cent, of the tax."(emphasis supplied)8. Section 271 (1) (a) (i) stipulates that the Income-tax Officer may direct that the assessee shall pay by way of penalty, in cases similar to the one that we are considering "in addition to the amount of the tax, if any, payable by him a sum equal to 2 per cent of the tax for every month during which the default continued but not exceeding in the aggregate 50 per cent of the tax".9. We must first determine what is the meaning of the expression "the amount of the tax, if any, payable by him" in S. 271 (1) (a) (i). Does it mean the amount of tax assessed under S. 143 or the amount of tax payable under S. 156? The word "assessed is a term often used in taxation laws. It is used in several provisions in the Act. Quantification of the tax payable is always referred to in the Act as a tax "assessed". A tax payable is not the same thing as tax assessed. The tax payable is that amount for which a demand notice is issued under S. 156. In determining the tax payable, the tax already paid has to be deducted. Hence there can be no doubt that the expression "the amount of the tax, if any, payable by him" referred to in the first part of S. 271 (1) (a) (i) refers to the tax payable under a demand notice. We next come to the question what is the meaning to be attached to the words "the tax" found in the latter part of the provision. It may be noted that the expression used is not "tax" but "the tax". The definite article "the" must have reference to something said earlier. It can only refer to the tax, if any, payable by the assessee mentioned in the first part of Section 271 (1) (a) (i). It is true the expression "tax" is defined in S. 2 (43) thus :" "tax" in relation to the assessment year commencing on the 1st day of April, 1965 and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date."10. But the difficulty in this case is, as mentioned earlier the expression used is not "tax" but "the tax". That expression can be reasonably understood as referring to the expression earlier used in the provision namely "the amount of the tax, if any payable" by the assessee. At any rate, the provision in question is capable of more than one reasonable interpretation. Two High Courts namely Calcutta and Mysore have taken the view that the expression "the tax" in Section 271 (1) (a) (i) refers to "the tax, if any, payable" (by the assessee) mentioned in the earlier part of the section. It is true that Lahore and Delhi High Courts have taken a different view. But the view taken by the Calcutta and Mysore High Courts cannot be said to be untenable view. Hence, particularly in view of the fact that we are interpreting, not merely a taxing provision but a penalty provision as well, the interpretation placed by the Calcutta and Mysore High Courts cannot be rejected. Further as seen earlier, the consequences of accepting the interpretation placed by the Revenue may lead to harsh results.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The word "assessed is a term often used in taxation laws. It is used in several provisions in the Act. Quantification of the tax payable is always referred to in the Act as a tax "assessed". A tax payable is not the same thing as tax assessed. The tax payable is that amount for which a demand notice is issued under S. 156. In determining the tax payable, the tax already paid has to be deducted. Hence there can be no doubt that the expression "the amount of the tax, if any, payable by him" referred to in the first part of S. 271 (1) (a) (i) refers to the tax payable under a demandmay be noted that the expression used is not "tax" but "the tax". The definite article "the" must have reference to something said earlier. It can only refer to the tax, if any, payable by the assessee mentioned in the first part of Section 271 (1) (a) (i). It is true the expression "tax" is defined in S. 2 (43) thus"tax" in relation to the assessment year commencing on the 1st day of April, 1965 and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date.But the difficulty in this case is, as mentioned earlier the expression used is not "tax" but "the tax". That expression can be reasonably understood as referring to the expression earlier used in the provision namely "the amount of the tax, if any payable" by the assessee. At any rate, the provision in question is capable of more than one reasonable interpretation. Two High Courts namely Calcutta and Mysore have taken the view that the expression "the tax" in Section 271 (1) (a) (i) refers to "the tax, if any, payable" (by the assessee) mentioned in the earlier part of the section. It is true that Lahore and Delhi High Courts have taken a different view. But the view taken by the Calcutta and Mysore High Courts cannot be said to be untenable view. Hence, particularly in view of the fact that we are interpreting, not merely a taxing provision but a penalty provision as well, the interpretation placed by the Calcutta and Mysore High Courts cannot be rejected. Further as seen earlier, the consequences of accepting the interpretation placed by the Revenue may lead to harsh results.