Supreme Court of India
The Commissioner Of Income-Tax
vs
M/S. Vegetables Products Ltd
Date Of Judgement – 29/01/1973
Equivalent citations: 1973 AIR 927, 1973 SCR (3) 448, 88 ITR 192
Author: K Hegde
Bench: Hegde, K.S.
ACT : Income Tax Act (43 of 1961), ss. 143, 156 and 271(1)(a)(i) – Penalty-Whether related to tax assessed or tax payable.
HEADNOTE : The assessee failed to furnish the return of its income within the time allowed but submitted the return after a notice under s. 28(3) of: the Income-tax Act, 1922, was served on him. A provisional assessment was made by the Income-tax Officer under s. 23B of the 1922-Act and the assessee deposited the amount. The Income-tax Act, 1961, having come into force thereafter, the Income-tax Officer the assessment under the provisions of that Act, determined the tax due and the penalty payable by the assessee. In doing so, he did not take, into consideration the amount deposited by the assessee, that is, he took into consideration not the amount demanded under s. 156 of the 1961-Act but the amount assessed under s. 143. The Appellate Assistant Commissioner confirmed the order; but the Tribunal held that the penalty under s. 271 (1) (a) (1) is to be levied on the tax assessed minus the amount paid under the provisional assessment order, and the High Court, on reference, agreed with the Tribunal.
Dismissing the- appeal by the Revenue to this Court,
HELD : (1) The acceptance of one or the other interpretation sought to be placed on s. 271(1) (a) (1) by the parties would lead to some inconvenient result; but the duty of. the Court is to read the section, understand its language and give effect to it. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the Legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. [451D-F]
(2)Section 271(1) (a) (i) stipulates that the Income-tax Officer may direct that the assessee shall pay by way of penalty, “in addition to the amount of tax, if any, payable by him a sum equal to two per cent of the tax for every month………….. 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. Hence, there can be no doubt that the expression ‘the amount of tax, if any, payable by him’ referred to in the first part of the section refers to the tax payable under a demand notice. The definite article ‘the’ in the words “the tax” in the latter part of the provision, shows that it refers to the tax, if any, payable by the assessee, mentioned in the first part of the section. [452D-G; 453A-B]
(3)At any rate, the provision is capable of more than one reasonable interpretation, and since the provision, is not merely a tax provision but a penalty provision as well the interpretation in favour of the assessee must be accepted. [453B-D] 449
M. M. Annaiah v. Commissioner of Income-tax, Mysore, 76, I.T.R. 582, approved. Vir Bhan Bansi Lai v. Commissioner of Income-tax, Punjab, 6 I.T.R 616 and Commissioner of Income-tax, Delhi v. Hindustan Industrial Corporation, 86 I.T.R. 657, disapproved.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : CIVIL APPEAL N0. 497 of 1970. Appeal by Certificate from the Judgment and order date June 26, 1969 of the Calcutta High Court in Income-tax Reference No. 145 of 1966.
S. C. Manchanda, T. A. Ramachandran, S. P. Nayar and R. N. Sachthey, for the appellant.
B. Sen, S. Sadhu Singh, J. M. Khanna and S.
Ramachandran, the respondent.
S. V. Gupte, T. S. Viswanatha Rao and A. T. M. Sampat, for the intervener.
The Judgment of the Court was delivered by HEGDE, J.-This appeal by certificate arises from the decision of the Calcutta High Court in a case stated by the Income-tax Appellate Tribunal, ‘B’ Bench, Calcutta. After setting out the relevant facts, the Tribunal solicited the opinion of the High Court on the following question of law :
