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

4. In this case we are concerned with the assessees assessment for the assessment year 1960-61, the relevant account year ending on December 31, 1959. In that regard the Income-tax Officer issued a notice under Section 22 (2) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the "1922 Act") on June 1, 1960. The same was served on the assessee on June 13, 1960. That notice required the assessee to submit its return on or before July 18, 1960. On July 18, 1960, the assessee moved for extension of time for submitting its return. The Income-tax Officer extended the time by two months and at the same time he informed the assessee that no further time would be allowed. The assessee failed to furnish its return within the extended time. Thereafter a notice under Section 28 (3) of the 1922 Act was served on the assessee on January 16, 1961. On the very next day, viz., January 17, 1961, the assessee filed its return for the assessment year in question. The assessment was completed by the Income-tax Officer only on October 31, 1962. Meanwhile on April 1, 1961 the Income-tax Act, 1961 (to be hereinafter referred to as the "Act") came into force. As under the provisions of Section 297 (2) (g) of the Act, the proceedings for the imposition of the penalty had to be initiated and completed under the Act, a fresh notice under Section 274 (1) of the Act was served on the assesee. The assessee objected to the validity of the notice but that objection was overruled. At present we are not concerned with that objection. We are also not concerned with the other objections taken by the assessee which were negatived by the Tribunal. The Income-tax Officer determined the tax due from the assessee for the assessment year at Rs. 1,25,512/10 P. and on that basis, the penalty payable by the assessee was fixed at Rupees 12,734/10 P. At this stage it may be mentioned that on February 2, 1961, a provisional assessment was made by the Income-tax Officer under Section 23-B of the 1922 Act. Immediately thereafter the assessee deposited Rupees 92,294/55 P. In determining the penalty due from the assessee, the Income-tax Officer took into consideration not the amount demanded under S. 156 of the Act but the amount assessed under S. 143 of the Act. In appeal, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. On a further appeal, the Tribunal came to the conclusion that the penalty under Section 271 (1) (a) (i) is to be levied on the tax assessed minus the amount paid under the provisional assessment order namely Rupees 92,294/55 P. On the basis of that finding, it determined the penalty payable by the assessee at Rupees 2,737/44 P. The conclusion of the Tribunal was accepted as correct by the High Court.

Reasoning: 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.