1988 PLP (Trib (PTD)

5. Before proceeding further let me point out that a Single Bench decision has also been reported on the same point as 1986 PTD (Trib.)

69. It appears that this case was decided on 12th October, 1985. Now if we read the Division Bench case, it appears that it was decided on 8th May, 1985. Thus, it is clear that the Division Bench case was decided earlier in point of time and was binding on the learned Single Member who decided the subsequent case. I also recall that the learned Single Member knew very much about the D.B. decision as he had discussed with both the Members of Division Bench the point involved. Under these circumstances the judicial propriety required that the learned Single Member should have followed the Division Bench. But, if he felt that the Division Bench had decided the matter wrongly, he could have discussed his reasons in his order so that in future the reasoning s of both the D.B. and S.B. would be considered by a subsequent Bench or the High Court. Instead, he sent the matter for publication and in the same issue of P.T.D. both the contradictory decisions have appeared. The Division Bench decision is mentioning the names of the Members whereas the Single Bench decision is not showing as to whether it is S.B. or D.B. matter, though, in fact, it is a Single Bench matter.

6. Since there was no conflict between two D.B. matters as such, there was no occasion for constitution of a Full Bench. However, it has been done so, and the question framed by the Full Bench squarely covers the controversy raised in earlier two decisions. The question framed is: "Whether failure to furnish wealth statement under section 58 (2) of the Ordinance would lead to imposition of penalty under section 108 ibid?" The former learned Chairman of this Tribunal who spoke for the Bench has summed up his answer in the following words:- "The insertion and inclusion of section 58 (1) in section 108 (a) was manifestly unnecessary and uncalled for when it has been specifically laid down in section 58 (2) that all the provisions of the Ordinance shall, so far as may be, apply to the wealth statement as they apply to the return of total income." Subsection (2) of Section 58 thus ought to be read in all the provisions where the default of section 55 is provided. The learned author of the judgment, therefore, answered aforesaid question in the affirmative, with whom both the learned Members concurred.

7. Before coming to the Division Bench case, which was written by me, let me refer to the Single Bench decision, which has been affirmed by the Full Bench. The learned Singe Member firstly observed: "Provision of the Ordinance relating to filing of return of total income having been made applicable to suo motu filing of wealth statement as well, the resultant effect will be that provisions of penalty prescribed for non-filing of return shall be applicable for default of section 58 (2) of the Ordinance as well." However, the learned Single Member went a step further and, held, the provision of section 110 of the Ordinance in pari materia with section 108 of the Ordinance for the purposes of penal action. He observed: "Under section 110, the legislature has mentioned section 58 as a whole without making any distinction of sub-clauses (1) or (2) of that section. The reason is quite obvious as provision of the Ordinance pertaining to a return of total income has been made applicable in extenso to suo motu filing of wealth statement as section 110 of the Ordinance is thus in pari materia with section 108 of the Ordinance for the purposes of penal action to be taken for default of section 58 of the Ordinance. Section 110 of the Ordinance provides for levy of penalty in case of non-compliance of notice issued under section 58 of the Ordinance. Obviously this is referable to section 58 (1) of the Ordinance wherein the I.T.O. is empowered to issue a notice calling for wealth statement of an assessee." Now, as far as the Division Bench matter is concerned, after discussing provisions of sections 55, 56, 108 and 110 of the Ordinance I came to the following conclusion:- "Thus, the legal position which emerges out from above discussion is that if an assessee fails to follow the provisions of section 55, or section 56 of the Ordinance, the Income Tax officer is empowered to impose penalty under section

108. Again, if an Income-tax Officer requires an assessee to file his wealth statement under section 58 (1) of the Ordinance and he commits default, the Income-tax Officer can impose penalty under section 110 of the Ordinance. But if an assessee fails to file his wealth statement alongwith his return, with due respect to learned Appellate Assistant Commissioner, no penalty can be imposed under section 108 of the Ordinance. Since section 108 is a penal provision it is to be given strict interpretation. In our judgment no penalty can be imposed without a legislative authority which is not available to an income Tax Officer regarding default in filing wealth statement alongwith the return."

8. Now if we keep all three decisions reproduced above in consideration it appears that the mainstay of the decisions of the learned Full Bench and Single Member are the words: "And all the provisions of this Ordinance shall, so far as may be, apply to the wealth statement as they apply to the 'return of total income. As used in subsection (2) of section 58 of the Ordinance. I would like, therefore, to start my discussion with this reasoning."

9. If we read section 55 we find that every person whose income is chargeable to tax is required by law to file his return. This return is to be filed on a prescribed form and in prescribed manner and within prescribed date, which, of course, could be extended by the Assessing Officer, but if such assessee does not filed his return at all, the I . T .O. has been empowered to serve a notice under section 56 on him and require him to file -his return. Now under section 55 we can come across, broadly speaking, two categories of case. (i) Firstly a case of that assessee who has not filed his return at all though section 55 applied in his case. (ii) Secondly, of that assessee who files his return after the prescribed date and without a reasonable cause. Let us now find out what power has been given to an Assessing Officer in either case.

10. Now, when we take up the first case the question arises whether the legislature wanted an Assessing Officer to restrict himself to imposition of a penalty under section 108 of the Ordinance only? The obvious answer appears to be in the negative. The reason appears to be quite cogent. By imposing penalty under section 108 the Assessing Officer would get to the maximum penalty at the rate of Rs.100 for every day during which the default continues. But there might be assessees who would prefer to pay penalty under section 108 rather than to be assessed either under section 62 or 63 of the Income Tax Ordinance. But the Income-tax Ordinance has been brought on Statute Book to subject to tax the income of an assessee and, thus, thereby generate maximum possible revenue, which is within the prescribed limits of law. First appellate forum and this Tribunal have been created to ensure that the tax is generated strictly within four corners of law. The imposition of penalty in absence of assessment, therefore, cannot be deemed to be in conformity with the intention of the legislature. The I. T. O. therefore, under these circumstances, is expected to invoke his powers of framing ex parte assessment under section

63. However, if we read section 63 it appears to us that he cannot frame ex parte assessment simply because of the default committed under section

55. In other words an Assessing Officer cannot frame an ex parte assessment in case of that assessee who fails to file his return. Section 63 requires that before a best judgment assessment is framed, an assessee should have failed to furnish his return of income in response to notice served upon him under section 56 of the Ordinance. It is thus clear that the Assessing Officer would have no option but to give a notice under section

56. In my humble opinion this is what the legislature has made abundantly clear by mentioning section 56 in section 63 of the Ordinance.

11. With this background if we revert to section 108 it would appear that the Assessing Officer is expected to impose penalty under section 108 only if the assessee has filed his return beyond the prescribed time and without any reasonable cause. In other words, it can be said that if an assessee does not file return under section 55 no penalty can be imposed under section

108. But if he files his return beyond prescribed time and without reasonable cause, section 108 should be pressed into service. Thus, if an assessee files his return no penalty can be imposed under section 108 but if he files his return beyond the prescribed time and without reasonable cause section 108 can definitely be pressed into service. Now, if we refer to reasoning of learned Single Member and the learned Members of the Full Bench we find it without any legs to stand upon. With due respect I feel that the interpretation which has been given does not fit in the general pattern and purpose of the Income-tax Ordinance. In my humble view the expression "all the provisions of this Ordinance shall apply to the wealth statement as they apply to return of total income" are not that much important than the words "so far as may be applicable" and unfortunately true import and significance of these words has neither been properly understood nor appreciated. I am therefore of the considered view that the provisions regarding the prescribed form. Verification, and prescribed time etc. are those provisions which have been made applicable under subsection (2) of section 58 of the Income-tax Ordinance and which have been laid down by section

55. Thus, if an assessee files his return beyond prescribed time and fails to prove that he was prevented by sufficient p cause, penalty can be imposed under section

108. But, if he does not file his return at all a notice under section 56 might to given to him and on default penalty can be imposed under section

108. Similarly, in case of wealth statement if it is filed beyond prescribed time and without reasonable cause penalty can be imposed under section

108. But if it is not filed at all a notice must be given and on default the penalty can be imposed under section

110. In my humble opinion the legislature has enacted section 110 to cover up default committed in both cases where notice is given for filing wealth statement either under section 58(1) or 58(2) whereas section 108 deals with' those cases only where wealth statement is filed beyond prescribed time and without reasonable cause. It is important to note that the legislature has not mentioned subsection of Section 58 in section 110 and it has been done deliberately for the reasons given above. The argument that since section 55 was mentioned in section 108 "the insertion and inclusion of section 58(1) in section 108 was manifestly unnecessary and uncalled for" appears to be superficial and without any substance. Ordinarily no superfluity can be ascribed to the legislature. Similarly, ignorance of law which it enacts muchless of various of a same Statute cannot be imputed to the legislature either.

12. The whole issue can be examined with reference to section 63 of the Income-tax Ordinance also. If we read this section we find that the best judgment assessment could be framed under following three conditions namely: (i) when an assessee fails to furnish his return despite service of notice under section 56, or (ii) where he fails to comply with the directions contained in section 61 of the Income-tax Ordinance, or' (iii) when he fails to file his wealth statement in response to notice issued under section

58. It is pertinent to note that in section 63 as well like section 110 al default of notice issued under section 58 has been mentioned without any subsection, If the provisions of the Income-tax Ordinance regarding return of total income have been made applicable in case of wealth statement as well under section 58(2) it should be held following Full Bench decision that mentioning of section 58 in section 63 is "manifestly unnecessary and uncalled for". However, it cannot be done as no superfluity can be attributed to the legislature. As such, it is to be held that the legislature has deliberately mentioned section 58 in section 63 to make it abundantly clear the ex parte assessment could be made only if the default was made of the notice issued under this section. In other words it appears that the provisions of the Income-tax Ordinance regarding return of total income are not to be applied in case of non-filing of wealth statement. Here again the legislature has once again highlighted the use of words "so far as may apply" as used in subsection (2) of section 58.

13. Now turning to the question as to why the legislature has once again used section 58 in section 63 instead of mentioning its subsections also as was done in section 110, the answer appears to be obvious. If we read section 58 w- find that I.T.O. is required to serve a notice under section 58(1) of the Income-tax Ordinance if he wants him to file a wealth statement though the law did not require him to do so. It therefore appears to be quite clear out of logical, necessity that the legislature was not contemplating issuing of notice under section 58(1) only when it made the non-compliance of notice under section 58 sine qua non for the best judgment assessment. Since section 58(2) does riot lay down any provision for issuance of notice the intention of the legislature by mentioning 58 in section 63 appears that best judgment assessment could be framed if an assessee fails to file his wealth statement in response to a notice issued either under section 58(1) or under section 58(2) as the case may be. Thus, it is clear that the legislature has used section 58 without mentioning its subsections to make it clear that both subsections apply if section 63 was to be made applicable.

14. It is also important to keep in mind that section 63 also lays down the provisions regarding return of total income and if section 55 is dealing with provisions of return of total income then sections 56 and 63 also deal with it. As such the question may be asked as to which of the provisions would be deemed to be applicable in a case falling under subsection (2) of section 58? In my humble opinion here again the words "so far as may apply" would play their role.

15. Turning to section 110 we find that sections 58 and 61 have been specifically mentioned therein. If we read section 110 with clause (b) of section 63 it appears that if an assessee commits a default when a notice under sections 58 and 61 is served on him, he not only exposes himself to best judgment assessment but the Assessing Officer can also impose penalty under section

110. Now if we read section 108 with 110 of the Income-tax Ordinance it appears that the legislature has deliberately omitted to mention section 58 in clause (a) section

108. Thus, if section 58 has not been mentioned in section 108 and section 55 does not empower the Assessing Officer to impose penalty for not filing the wealth statement as discussed earlier, the conclusion to which we inevitably arrive at it is that .the Division Bench of this Tribunal took correct stand while interpreting section 108 of the Income-tax Ordinance.

16. To conclude the upshot of this discussion can be summed up as follows: - (i) That the provisions of the Income-tax Ordinance are applicable under section 58(2) of the Income-tax Ordinance if they are found to be applicable. (ii) That it cannot be said that since legislature has mentioned section 55 in clause (a) of section 108, therefore, if the wealth statement was not filed it would amount to its violation, hence penalty can be imposed under section 108(a). (iii) That the provisions of section 55 apply in case of wealth statement in so far it deals with the date prescribed for filing return, the form on which it is to be filed and verification, etc. Section 55 does not mean that if wealth statement is not filed it would lead automatically to imposition of penalty under section 108. (iv) That if an assessee fails to file his wealth statement in response to a notice issued either under section 58(1) or 58(2), the Assessing Officer can impose penalty under section

110. He can also frame ex parte assessment in such case.

17. Now turning to the merits of the appeal it appeared that the respondent filed his return of income without wealth statement. From perusal of the order it appears that the I.T.O. reminded the respondent several times but no compliance was made. It further appears that he also issued a show-cause notice but no wealth statement was filed. The I. T.O., therefore, imposed penalty at the rate of 25% per day which came to Rs.13,025 with approval of his I.A.C. On appeal, however, the learned C.I.T. (Appeals) deleted the penalty for the reason that section 108 did not provide for the levy of a penalty for failure to furnish wealth statement. He, however, held that neither notice under section 58 was issued nor wealth statement was filed. According to him issuance of notice under section 116(b) could not be treated as notice under section

58. He further came to the conclusion that even though the penalty could be deemed to have been imposed under section 110, it was not sustainable. Dealing with this argument the learned C.I.T. (Appeals) observed:- "If the penalty is imposed under section 110 and the mention of section 108 was a misnomer the order of the I. T. O. would still remain unsustainable because section 110 clearly lays down that for non-compliance of notices under section 58 or 61 a penalty may be imposed not exceeding the amount equal to the amount of tax which would have been avoided if the income as returned had been accepted as the correct income. In these cases I find that the returned incomes have been accepted and as such the question of avoiding any tax on the basis of the returned incomes does not arise. Therefore, even under section 110 no penalties remain exigible for these two assessments."

18. In the, grounds of appeal it has been contended by the depart ment that the order imposing penalty was actually under section 110 and not

108. However, I agree with learned C.I.T. (Appeals) that the order imposing penalty cannot be deemed to have been made under section 110 of the Income-tax Ordinance firstly because no notice under section 58(2) was issued and secondly because a notice issued under section 116(b) cannot be deemed a notice under section 58(2) of the Income-tax Ordinance. I also agree with him that section 108 did not apply in this case. Nevertheless, in view of Full Bench decision I might have allowed these departmental appeals but the department has not taken up the plea in its grounds of appeals that the order was under section 108 and sustainable in law. On the contrary they have asserted that the order was actually under section

110. Since I have agreed with learned C.I.T. (Appeals) that it was not an order under section 110 I find no force in these departmental appeals on merit. Both of them, therefore, stand rejected accordingly. M.B.A./458/T Appeal dismissed.