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Petitions Nos. 170, 181 and 182 of 1967, decided on 22nd January 1969.

‑Provisional assessment‑Levy of additional tax‑Ex pression "an additional amount of tax equal to 6 per cent. per annum of the amount of tax due" in S. 45‑A‑Does not mean either "a penalty" or "an interest" payable by a defaulting assessee on tax due‑Such additional amount a tax sought to be levied on already computed tax due from assessee on his total income without any support from authorising Ss. 3 & 55‑Levy of additional tax, held, .not legal and effective.

‑ Language of statute clear, unambiguous and plain in its meaning‑No scope for Court to give an interpretation to it which language cannot bear.

The language used by the Legislature in a statute, according to the accepted principles of interpretation, must be given its ordinary plain meaning. When the language used by the Legislature is ambiguous and the intention of it cannot be gathered on a plain reading of it then and then alone the question of assigning a meaning to it by way of interpretation arises but that again must be in conformity with the other provisions of the statute. But where the language is clear, unambiguous and plain in its meaning, there is no scope for the Court to give an interpretation to it which the language cannot bear.

Syed Ishtiaq Ahmed and Samad Meah for Petitioner (in all the 3 Petitions).

Afzal‑ul‑Haque for Respondents Nos. 1 and 2 (in Petitions Nos. 170 and 182 of 1967, respectively) and for Respondent (in Petition No. 181/67).

Dates of hearing : 9th, 10th, 13th, 14th and 20th January 1969.

.‑This judgment will dispose of Petitions Nos. 170, 181 and 182 of 1967 which were heard together.

In Petition No. 170 of 1967 the facts are that the petitioner was assessed by the Income‑tax Officer, Companies Circle II, for the assessment year 1960‑61 in April 1964 and on such assessment he issued a notice of demand, dated 20th April 1964, demanding in all Rs. 2,64,926 as income‑tax dues for the said assessment year. The said amount included also a penal interest under section 18‑A of the Income‑tax, amounting to Rs. 40,666 and the entire amount of tax due was made payable by the said notice by the 21st of May 1964. The petitioner not being able to pay the entire amount in one instalment prayed for several instalments and has since paid up the dues. On 9‑10‑65 the income‑tax Officer directed the petitioner to pay an additional tax of Rs. 7,795 under section 45‑A of the Income‑tax Act. This amount was levied for non‑payment of Income‑tax and super tax for the assessment year 1960‑61 in time. The order made by respondent No. 2 (the Income‑tax Officer) on 9‑10‑65 levying an additional tax of Rs. 7,795 did not specify the period or periods and the amount or amounts of default for which additional tax was levied. Further, it is stated by the petitioner that respondent No. 2 did not take into account the amount paid by instalments which periodically reduced the total tax liabilities and thereby the liability for additional tax under section 45‑A. The petitioner also alleged that it was not aware as to how actually the calculation was made with regard to this levy of additional tax. The petitioner then filed an application for revision under section 33‑A of the Income‑tax Act before the Commissioner of income‑tax, Dacca Zone, Dacca (respondent No. 1) on 6‑10‑66 challenging the order of the Income‑tax Officer on grounds inter alia that section 45‑A of the Act having been enacted in 1963 is not applicable retrospectively to tax dues for the assessment year 1960‑61 and also that the Income‑tax Officer ought to have passed a 'Proper order showing the period or periods and amount or amounts of default for which the additional tax was levied and. that the provisions of section 45‑A being of penal nature were not applicable without prior notice to the assessee and without giving the assessee an opportunity of representing its case. The respondent No. 1 set aside the order of the Income‑tax Officer but only on the ground that the calculation of additional tax made by respondent No. 2 was absolutely wrong and directed him to issue a fresh order showing correct and proper calculation of the additional tax. Respondent No. 1, however, rejected other contentions of the petitioner including that of retrospective application of the provisions of section 45‑A. After calculating the demand for additional tax, the respondent No. 2 issued a. fresh demand notice of Rs. 6,287 under section 45‑A on 29‑3‑67.. The petitioner thereafter demanded of the respondent No. 2 to do justice to his case by cancelling the levy of the additional tax through a notice of demand served by his lawyer. One Mr. G. Kabir, Officer on Special Duty in the office of the Comm1s sioner of Income‑tax, East Pakistan, Dacca Zone, by his letter dated 12th of April 1967, replied to the Advocate of the petitioner saying that if the petitioner was dissatisfied with the order of' respondent No. 1 it was free to go before the Central Board of Revenue but if instead it would go to the High Court challenging the order under Article 98 it would do so at its own risk with regard to the costs as the Department would certainly defend the order.

Thereafter, the petitioner filed the present three application challenging the validity of the order of respondent No. 2 in imposing an additional tax under section 45‑A of the Income- tax Act in respect of the tax due for the assessment years 1960‑61 (Petition No. 170/67), 1963‑64 (Petition No. 181 /67) and 1964‑65 (Petition No. 182/67).

The petitioner has challenged the validity of the order of the respondents with regard to the levy of additional tax under section 45‑A of the Income‑tax Act in Petition No. 170 of 1967 on two grounds; firstly, that no levy of additional tax could be made on the tax due for reasons which we shall state later while considering the arguments of the learned Advocate, and, secondly, on the ground that there could not be any retrospective appli cation of the provisions of section 45‑A of the Income‑tax Act to the present cases.

Of the two grounds on which the assessments for the years 1963‑64 and 1964‑65 are challenged in Petitions Nos. 181 and 182 of 1967 respectively, the first one is the same as in Petition No. 170 of 1967 and the second is the applicability of section 45‑A to a provisional assessment made under section 23‑B of the income‑tax Act.

Before we proceed to record the submissions of Mr. Ahmed we would quote here the provisions of the three relevant sections, namely sections 3, 55 and 45‑A of the Income‑tax Act

"3. Where any Central Act enacts that Income‑tax shall be charged for any year at any rate or rates, tax at that rate or these rates shall be charged for that year in accordance with, and subject to the provisions of this Act in respect of the total income, of the previous year or the previous years, as the case may be, of every person

Provided that where by virtue of any provision of this Act.

(a) Income‑tax is to be charged in respect of the income of a period other than the previous year or previous years as the case may be, Income‑tax shall be charged accordingly. (b) Income‑tax is to be deducted at source or paid in advance it shall be so deducted or paid, as the case may be."

"55---(1) In addition to the Income‑tax charged for any year, there shall be charged, levied and paid for that year in res pect of the total income of the previous year or previous years, as the case may be, of any individual, Hindu undivided family, company, local authority, unregistered firm, registered firm or other association of persons or the partners of the firm or members of the association individually, an additional duty of Income‑tax (in this Act referred to as super tax) at the rate or rates laid down for that year by the Central Act

Provided that where under the provisions of clause (b) of sub section (5) of section 23 an unregistered firm has been assessed in the manner applicable to a registered firm, super tax shall be payable by the firm and each partner of the firm individually on his share in the income, profits and gains of the firm

Provided further that where the profits and gains of an un registered firm or other association of persons (not being either a company or a registered firm) have been assessed to super tax, super tax shall not be payable by a partner of the firm or a member of the association, as the case may be, in respect of the amount of such profits and gains which is proportionate to his share:

Provided further that super tax shall not be payable by a registered firm in respect of the income, profits and gains derived by it from the exercise of a profession, if such income, profits and gains depend wholly or mainly on the personal qualifications of its partners who are prevented by any law for the time being in force or by convention or rules or regulations of the professional association, society or similar body of which they are members to constitute themselves into a corporate body with a limited liability which can be registered as a company under the Companies Act, 1913, unless such profession consists wholly or mainly in the making of contracts on behalf of other persons or the giving to other persons advice of a commercial nature in connection with the making of contracts

Provided further that where by virtue of any provision of this Act, super tax is to be charged‑

(a) in respect of the income of a period other than the previous year or previous years, as the case may be, super tax shall be charged accordingly ;

(b) super tax is to be deducted at source or paid in advance, it shall be so deducted or paid, as the case may be."

"45‑A. Where any assessee fails to pay the tax due from him, he shall, without prejudice to his liability under any other provisions of the law, be liable to pay an additional amount of tax equal to six percent per annum of the amount of tax due from him from the date on or before which it was originally made payable (hereafter referred to as the said date) to the date of its payment.

Provided that where at the request of the assessee, the tax is allowed to be paid in instalments, such additional amount of tax shall be payable in respect of each instalment from the said date to the date on which it is paid."

Mr. Ishtiaq Ahmed, the learned Advocate for the petitioner, contended on the point, of. validity of the provisions of section 45‑A that the Income‑tax Act authorises the levy of income‑tax and super tax on the total income of the previous year of an assessee, or in other words, the levy, of tax must be referable to the total income of the previous year of an assessee and no tax can be levied on any other sum which is not the total Income of the assessee for the previous year.

According to Mr. Ishtiaq Ahmed the authority to levy tax under the Income‑tax Act of 1922 is to be found in sections 3 and 55 thereof. Section 3 authorises levy of income‑tax and section 55 authorises levy of super tax and except these two sections there is no other charging section in the whole of the income‑tax Act. These two charging sections speak about the subject‑matter on which tax can be levied, i. e., the total income of the previous year, as well as the rate at which the tax can be levied on the same. The rate is therefore referable not to anything else but to the total income of the previous year. The provisions of the charging sections, namely, 3 and 55, lie dormant until the Finance Act for the particular year is passed which brings these two charging sections to life. The duty of the Finance Act is to fix the rate for a particular year of the income‑tax and super tax to be paid by an assessee for his total income of the previous year as authorised by sections 3 and 55. In this context, if the provisions of section 45‑A are studied, it will be found that the additional tax of 6 % per annum of the amount of tax due from the assessee has no relation to the total income of the assessee and is also not referable to the said total income. This additional tax of 6 % per annum relates to the tax due. Thus, according to Mr. Ishtiaq Ahmed, the provisions of section 45‑A for levying "an additional amount of tax equal to 6 % per annum of the amount of tax due" from the assessee is totally outside the scope of the charging sections 3 and 55 and as such is illegal.

Mr. Afzalul Haque, the learned Advocate for the Depart ment, on the other hand, contended that although the language used in section 45‑A is not a happy one, yet what the Legislature meant to say is that an amount of 6 % on the tax due will be levied if the assessee has failed to pay the tax due on or before the date fixed in the notice of demand under section 29 of the Act and therefore is not a tax but a sort of penalty imposed on the defaulting assessees. This, according to Mr. Afzalul Haque, will be clear if reference is made to subsection (14) of section 2 the definition section. Subsection (14) of section 2 says

" tax' means the tax payable under this Act and includes any penalty, interest, fee or other charge leviable under this Act."

For the following reasons it is difficult for us to accept the contention of Mr. Afzalul Haque. Provisions have been separately made in sections 45 and 46 dealing with an assessee in default, i.e. an assessee who has not paid the tax due within time. Section 45 of the Act defines an assessee in default. It says

"45. Any amount specified as payable in a notice of demand under subsection (3) of section 23‑A or under section 29 or an order under section 31 or section 33, shall be paid within the time, at the place and to the person mentioned in the notice or order, or if a time is not so mentioned, then on or before the first day of the second month following the date of the service of the notice or order, and any assessee failing so to pay shall be deemed to be in default, provided that, when an assessee has presented an appeal under section 30 or clause (a) of subsection (1) of section 33, the Income‑tax Officer may in his discretion treat the assessee as not being in default as long as such appeal, is undisposed of

Provided further that where an assessee has been assessed in respect of income arising outside Pakistan in a country the laws of which prohibit or restrict the remittance of money to Pakistan the Income‑tax Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which by reason of such prohibition or restriction cannot be brought into Pakistan and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed.

Explanation.‑For the purposes of this section income shall be deemed to have been brought into Pakistan if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee without Pakistan or if the income whether capitalised or not has been brought into Pakistan in any form."

In the event of an assessee becoming a defaulter as mentioned in section 45, he has to be dealt with under section 46 which provides for penalty to be imposed on the defaulting assessee. Although the penalty provided for in section 46 is in reference to a defaulting assessee mentioned in section 45 and the amount recoverable by way of penalty is equal to the tax due or less than that and not in reference to the total income, yet there is no difficulty in imposition of penalty under section 46 in reference to the tax due because it is not a tax but a punishment, and Mr. Ishatiaq Ahmed does not contend that this could not be done. Rather he conceded that since it is penalty it can be imposed in reference to the tax due, as interest is leviable and payable under section 18‑A of the Act. Therefore, in the context of the provisions mentioned above, if we examine the language used in section 45‑A, what we find is that an additional amount of tax "equal to six per cent. per annum of the amount of tax due" sought to be imposed under section 45‑A on an assessee who has not paid the "tax due" within the time cannot be termed either as penalty or as an interest because of the language used immediately before the phrase we have quoted above which is "an additional amount of tax".

If the Legislature as is sought to be argued by Mr. Afzalul Hoque, intended to make this amount of 6 % to be either a penalty or an interest on the "tax due" we find no reason for the Legislature not to have said so. The language used by the Legislature in a statute, according to the accepted principles of interpretation, must be given its ordinary plain meaning. When the language used by the Legislature is ambiguous and the intention of it cannot be gathered on a plain reading of it then and then alone the question of assigning a meaning to it by way of interpretation arises but that again must be in conformity with the other provisions of the statute. But where the language is clear, unambiguous and plain in its meaning, there is no scope for the Court to give an interpretation to it which the language cannot bear. In, section 45‑A the language used is "an additional amount of tax equal to six per cent. per annum of the amount of tax due from the date on or before . " It can without any difficulty be said that the meaning and the intention of the Legislature is so clear and plain from the language used that it meant to levy‑ an additional tax' on the tax due' the rate of which will be 6 per annum of the tax due. Thus, it will be seen that the rate of 6 " is not referable to the total income and the amount sought to be realised is neither interest nor penalty.

Now, therefore, if the authorising sections, namely, sections 3 and 55, do not permit levy of tax on anything other than the total income and that the rate must be referable to the total income alone, then that tax which has no bearing nor connection with the total income must be held to be a tax levied or sought to be levied without any legal authority whatsoever are also unable to accept the interpretation sought to be given by Mr. Afzalul Haque to the provisions of section 45‑A depending on the definition clause 2(14) of the Act, because section 2(14) speaks of two things while defining "tax". In our opinion the first part of section 2(14) refers to the tax payable under this Act which has been defined in sections 3 and 55, and the second part of section 2(14) beginning with the words "and includes" to "this Act" only refers to penalty, interest, fee or other charge leviable under this Act to be a tax not as "tax" as mentioned in sections 3 and 55 for the purpose of realisation of penalty, interest, fee or other charge leviable under the Income tax Act as if it was a tax due. Or, in other words, the "tax" mentioned in the first part of section 2(14) is the tax simpliciter relatable to the total income of the assessee as mentioned in sections 3 and 55 whereas penalty, interest, fee or other charge leviable under this Act have been construed to be "tax" but not an relation to the total income and as such cannot be said to be either income‑tax or super tax as the case may be. Therefore, me find no reason to agree with Mr. Afzalul Haque that the definition clause 2(14) is of any assistance to him to interpret the provisions of section 45 "an additional amount of tax equal to six percent per annum of the amount of tax due" to mean either a penalty ‑or an interest payable by a defaulting assessee on the tax due. In our opinion, therefore, "additional amount of tax equal to six percent per annum of the amount of tax due" is a tax which is sought to be levied on the already computed tax due from the assessee on his total income for the assessment year without any support from the authorising sections 3 and 55. 'We' have, therefore, no hesitation, on the language used in section 45‑A, to say that the additional amount of tax levied on the tax due from the petitioner for the assessment year 1960‑61 is without any lawful authority or any legal basis. "

The second point of Mr. Ishtiaq Ahmed is that section 45‑A could not be retrospectively applied in the case of his client relating to the assessment year 1960‑61 because section 45‑A was brought on the Statute Book in April 1963. The reasons, :according to Mr. Ishtiaq Ahmed, are that his client was amenable to pay tax on his total income for the year 1959‑60, i.e. :assessment year 1960‑61, according to the rate fixed by the Finance Act of 1961, and in the year 1961 section 45‑A not being on the Statute Book, his client could not be asked to pay this additional amount of tax as contemplated by section 45‑A for non‑payment of tax due for the assessment year 1960‑61 even though the assessment was made in 1964 i.e. after the introduction 'of section 45‑A. Since we have already held that the levy of additional tax under section 45‑A is not legal and effective, we need not decide the second point with regard to retrospectivity.

Our decision on the point of validity of the provisions of section 45‑A is equally applicable to the case of the assessee for the assessment years 1963‑64 and 1964‑65 which are under challenge in the other two petitions, namely, Petitions f81 and 182 of 1967.

The additional point raised in the other two cases, (Petitions 181 and 182 of 1967) by Mr. Ishtiaq Ahmed is with regard to the applicability of section 45‑A to‑ a provisional assessment made under section 23‑B of the Income‑tax Act ill view of the provisions of section 23‑B (5).

Section 23‑B (5) is in the following terms

"23‑A. (1). . . . . . . . . .

(2) . . . . . . . . . . .

(3) . . . . . . . . . . .

(4) . . . . . . . . . . .

(5) For the avoidance of doubt, it is hereby declared that the provisions of section 45 except the first proviso and section 46 apply in relation to any tax payable in pursuance of a pro visional assessment made under subsection (1) as if it were a regular assessment made under section 23.

(6) . . . . . . . . . . .

(7) . . . . . . . . . . .

(8) . . . . . . . . . . ."

According to Mr. Ishtiaq Ahmed tax payable on provisional assessment cannot be said to be a tax due because a tax becomes due after the total income of the assessee is computed, tax assessed and a demand is made therefor under section 29. But in a provisional assessment what is done is that on the basis of the Return filed by the assessee the tax is determined on the Return submitted pending the final assessment under section 23. Since section 45‑A speaks of an additional tax at six per cent. per, annum of tax due' its provisions cannot be applicable to a provisional assessment as no tax can be said to be‑ finally becoming due until the assessment is completed under section 23 and a demand therefore, is made under section 29 and the assessee has defaulted in paying the same within the due date. Since we have held in favour of the petitioner that the provisions of section 45‑A are legal, we don't think we need decide this additional point raised by Mr. Ishtiaq Ahmed in Petitions Nos. 181 and 182 of 1967.

In the result, these applications succeed and the Rules are made absolute but without any order as to costs:

Mr. Afzalul Haque prays for stay of the operation of this order for five weeks from today and Mr. Ishtiaq Ahmed does not have any serious objection to it we think that the prayer is a reasonable one and the same is allowed.

.‑I agree.

S. Q.

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