1988 PLP (Trib (PTD)

ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER).--These are two appeals filed by a registered firm against the penalty imposed under section 28 (1-B) (b) of the repealed Income Tax Act (hereinafter referred to as 'the Act') for default of payment of advance, tax for the assessment years 1969-70 and 1970-71. In the grounds of appeals, the assessee has only contested the excessiveness of the penalty. However, at the time of hearing of these appeals by a Division Bench, a question appears to have been raised before the Tribunal that penalty could not be imposed on the registered firm treating it as an unregistered firm as provided in porviso to subsection (1-A) to section 28 of the Act. Consequently, the case was referred to a larger Bench so that an authoritative decision could be given in this matter:

2. Before proceeding further it would be convenient to refer to the relevant provision of which the interpretation is required. Subsection (1-B) of section 28 is reproduced below:- (1-B) If the Income-tax Officer in the course of any proceedings in connection with an assessment under section 23 is satisfied that any person. (a) has furnished under subsection (2) or subsection (3) of section 18-A estimates of the tax payable by him which he knew or had reason to believe to be untrue; (b) has without reasonable cause failed to comply with the provisions of subsection (1) or subsection (3) of the said section 18-A. he may direct that such person shall pay by way of penalty in the case referred to in clause (s), a sum not exceeding one and a half times the amount by which the tax actually paid during the year under the provisions of section 18-A falls short of the tax that should have been paid by the assessee under subsection (1) of section 18-A, or eighty per cent of the tax determined on the basis of the regular assessment as modified in the manner provided in subsection (6) of section 18-A whichever is the less: and in the case referred to in clause (b) , a sum not exceeding one and a half times the said eighty per cent and the proviso to subsection (1-A) shall so far as may be apply accordingly." The penalty has been imposed under section 28(1-B)(b) of the Act. According to this clause a penalty is to be imposed if an Income-tax Officer in the course of any proceedings, is satisfied that any person had not complied with the provisions of subsection (1) or subsection (3) of section 18-A of the Act. In other words, if any person had failed to pay advance tax as required by section 18-A he was liable to pay a penalty under this clause. It has further been provided A that in case of default as given in clause (b) the penalty imposable would be "a sum not exceeding 11 times the said eighty per cent and the proviso to subsection (1-A) shall, so far as may be apply accordingly'. Now under subsection (1-A) there are two provisos, which are reproduced below: "Provided that where concealment referred to in clause (a) of this subsection is, in a case where the assessment of tax was made under subsection (1) of section 23 the words 'two and a half times' occurring in the subsection shall be read as 'five times'. " Provided further that where the person liable to penalty is a registered firm or an unregistered firm treated as a registered firm under clause (b) of subsection (5) of section 23, the amount of tax which would have been avoided if the income as returned had been accepted as the correct income shall be taken to be the difference between the amount of tax which would have been payable by an unregistered firm on an income equal to the firm's total income and the amount of tax payable by an unregistered firm on an income equal to the income of the firm as actually returned by the firm and where no return of income had been filed the amount of tax payable by such person shall be taken to be equal to the ;mount of tax payable by an unregistered firm on an income equal to the total income of such person."

3. The second proviso being relevant, the penalty has been imposed on the assessee-firm treating it as an unregistered firm.

4. The learned counsel's precise argument was that in clause (1-B) which makes the proviso to section (1-A) applicable, it is only mentioned that "the proviso to subsection (1-A) shall so far as may be apply accordingly' but it is not specified as to which of the two provisos are to lie made applicable. Since, according to the learned counsel, there is an ambiguity in subsection (1-B) therefore it is to be interpreted in favour of the assessee and second proviso to subsection (1-A) cannot be applied in calculating the penalty under subsection (1-B) of section 28.

5. In order to bring home this contention the learned counsel gave a brief history of the legislation. It was submitted that subsection (1-B) had been omitted by the Finance Act, 1966. It was further submitted that at that time the first proviso to subsection (1-A) was not there and there was only one proviso, which is now the second proviso to subsection (1-A). It was further contended that before the omission of subsection (1-B) by the Finance Act of 1966 reference to the proviso of subsection (1-A) in subsection (I-B) was understandable as there was only one proviso at that time. However, by the Finance Ordinance, 1967 when subsection (1-B) was reintroduced, simultaneously first proviso was also added to subsection (1-A) with the result that when subsection (1-B) was reintroduced there were two provisos to subsection (1-A) but reference under subsection (1-B) is only to one proviso. Which of the two provisos is being referred to, is not clear and this ambiguity must go for the benefit of the assessee.

6. We have not been able to persuade ourselves to agree to the most ingenuine contention raised by the learned counsel for the assessee and we have number of reasons for it.

7. Firstly, it is needless to go into the history of this legislation because the assessment years are 1969-70 and 1970-71 when both the provisos to subsection (1-A) were already there. Therefore, the wording has to be taken on their face value as they stood at the time of the imposition of the penalty or when the default was committed.) Secondly, if we look at the provision carefully the referring words in subsection (1-B) are "the proviso to subsection (1-A) shall so far as may be apply accordingly". The article 'the' refers to a particular proviso or in other words w can say that a specific proviso is being referred to and which one is that proviso is clear when we read the two provisos separately. Obviously the first proviso to subsection (1-A) has no application nor any relevancy to the proviso mentioned in subsection (1-B) because that relates to the concealment of income and has only reference to subsection (1-A). Therefore, the only proviso which, could possibly be referred to in subsection (1-B) is the second proviso. Now this expression of the Legislature could be in two ways. By saying that the second proviso to subsection (1-A) would apply; or the second way of expression would be to use the article 'the'. The use of the article 'the' has achieved the same purpose as it would have if the word 'second' had been used. Thirdly, under the General Clauses Act as well as on the principle of interpretation of the Statutes, singular includes plural and the plural includes singular. Therefore, when the word 'proviso' is mentioned, it can be used as 'provisos' also and when we read these words alongwith the words 'so far as may be' it gives a choice, meaning thereby that whichever is the proviso applicable out of the) two provisos, that would be applicable.

8. In view of the discussion made above, we are not inclined to interfere with the impugned orders. The appeals have no merit and are therefore dismissed. M. B. A./531/T Appeals dismissed.