1985 PLP 223 (PTD)

In order to appreciate the submissions of Mr. Shaikh Haider, it is necessary to refer to the relevant provisions of section 18‑A of the Income‑tax Act; 1922 as they stood at the relevant time. These are subsection (6) and (7) read as follows: "(6) Where in any year an assessee has paid tax under subsection (2) or subsection (3) on the basis of his own estimate and, the tax so paid is less than eighty pe. cent of th .ax determined on the basis of the assessment Cider section 23, hereinafter called regular assessment, and calculated in the manner laid down in subsection (1) so far as such tax relates to income to which the provisions of subsections (2), (2‑A) and (2‑B) of section 18 do not apply ...., an additional amount of tax at the rate of two per cent per mensem from the first day of April in the year which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent: Provided that‑‑ (a)??????? where tax is paid under section 22‑A, or (b)??????? where a provincial assessment under section 23‑B has been made but regular assessment has not been made. the additional amount of tax shall be calculated in accordance with the foregoing provisions (i)???????? up to the date on which tax under section 22‑A, or as provisionally assessed was paid, and (ii)??????? thereafter such additional amount shall be calculated at the rate aforesaid on the amount by which the tax was so paid, in so far as it relates to income to which the provisions of subsections (2), (2=A) and (2‑B) of section 18 do not apply, falls short of the said eighty per cent: Provided further that, where, as a result of an appeal under section 31 or section 33 or of a revision, under section 33‑A , or of a reference to the High Court under section 66, the amount on which additional tax was payable under this subsection has been reduced the additional tax shall be reduced accordingly and the excess additional tax paid, if any, shall be refunded together with the amount of income‑tax that is refundable: Provided further that, where a business, profession or vocation is newly set up and is assessable on the income, profits and gains of its first previous year in the year following that in which it is set up, the additional tax payable shall be computed from the first day of July of the‑said year. A perusal of third proviso 1o subsection (6) (ibid) would show that where a business, profession or vocation is newly set up and is assessable on the income, profits and gains of its previous year in the year following that in which it is set up, the additional tax payable shall be computed from the first day of July of the said year. It will thus be seen that in this case, the income of first previous year was assessable and was in fact assessed in the year following that in which business ‑was set up, therefore, additional tax for not paying the advance tax as provided in section 18‑A(1) was to be calculated from the first day of July of the year in which tax was assessable. Therefore, Income‑tax Appellate Tribunal was manifestly in error when it accepted the contention of the assessee that the, date from which interest could have been charged was indeterminable. Learned Tribunal further erred in relying on the decision in Income‑tax Appeal No. 1526 of 1963‑64 (Assessment year 1957‑58) 1965 P T D (Trib. )

27. In this case, the facts as noted in the head notes were that on assessee's failure to file return under section 22(2) and to produce accounts under section 22(4) of the Income‑tax Act the Income‑tax Officer made an ex parte assessment and further issued a show‑cause notice under section 28(3) ff the Act. An explanation was furnished by the assessee in reply to this notice wherein it was contended that accounts were under audit with the auditors and, therefore, neither the return could be filed nor the books of accounts could be produced as required under the two notices under sections 22(2) and 22(4) of the Act. Being not satisfied with the explanation the Income‑tax Officer imposed a penalty of 50 per cent of the tax for both the defaults. This penalty order was confirmed in , appeal by the Appellate Assistant Commissioner. Before the Appellate Tribunal the assessee contended, that the penalty order was illegal and contrary to the provisions of law under which it was imposed because (i) the penalty order did not specify the quantum of penalty for each default which was punishable independently and separately within the meaning of clauses (a) and (b) of section 28(1) of the Act, and (ii) when no return had been filed no penalty could be imposed for the default of notice under section 22(4) within the meaning of clause (b) of section 28(1). On allowing the appeal, the Tribunal held, that:‑‑ (i)???????? a penalty for a default under section 22(4) is impossible only when ‑a return is available when this default is committed, and in the instance case return was not available on 15th August, 1957, when this default was committed; (11)????? the penalty was imposed for a double default, for the defaulter under' section 22(2) and the default under section 22(4), but nowhere from the order it is ascertainable how much penalty pertains to each default. This is a clear lacuna in the penalty order, and. (iii)?????? the accounts were under audit and unless this checking was over a really true return could not be filed This was a reasonable cause within the meaning and for the purpose of section 28(1) and clause (a) of this section. Therefore, under the circumstances penalty for the default to file the return was uncalled for and ought to have been excused." It is, therefore, clear that this case has no relevancy to the case under consideration particularly, in view of the third provision of section 18‑A, subsection (6) of the Income‑tax Act, 1922. It may however, be mentioned that the Income‑tax officer erred in directing the calculation of additional tax from first day of April, 1967, although, according to the provisions of the third proviso to subsection (6) of section 18‑A, of the Income‑tax Act, 1922, he should have directed the calculation of additional tax from first day of July, 1967. The error, it was explained, occurred due to the fact that in the relevant rule first day of April, is mentioned, but it was conceded that the provisions of the Act shall prevail. The error could be rectified. We for the foregoing response answer question in affirmative. M. B . A.???????????????????? ?????????????????????????????????????????????????? Question answered in affirmative