Case Note & Summary
The case arose from demands of interest and penalty made by the Income Tax Officer, Kanpur against four partners—Mani Ram, Jagmohan, Kishandas, and Bhagirathmal—of the firm Shri Kishan Das, Dhankutti, Kanpur. For the assessment year 1953-54, the partners filed returns on 27 September 1954 and were provisionally assessed on 14 October 1954 under section 23B of the Indian Income-tax Act, 1922, while regular assessment was completed only on 27 February 1958. For the subsequent years 1954-55 to 1958-59, the firm made profits, and the partners filed returns but did not send any advance tax estimate or pay advance tax as contemplated by section 18A. The Income Tax Officer, during regular assessments under section 23, held that the partners were liable to pay interest under section 18A(8) and imposed penalty under section 18A(9)(b) read with section 28, on the ground that they had failed to comply with section 18A(3). The partners appealed to the Appellate Assistant Commissioner, but the appeals were dismissed, and their revision applications to the Commissioner of Income Tax also failed. The partners then filed writ petitions before the Allahabad High Court, contending that section 18A(3) did not apply to them because they had already been provisionally assessed and were thus not persons ‘who had not hitherto been assessed’. A learned Single Judge allowed the writs and quashed the orders of the Income Tax Officer and the appellate authority, holding that the provisional assessment under section 23B in 1954 precluded the application of section 18A(3). On appeal by the Revenue, a Division Bench confirmed the Single Judge’s decision. The Revenue then appealed to the Supreme Court by special leave. The sole question before the Supreme Court was whether the expression ‘any person who has not hitherto been assessed’ in section 18A(3) of the Act included a person who had been provisionally assessed under section 23B. The Court examined the scheme of sections 18A, 23, and 23B and noted that section 18A(1) uses the word ‘assessed’ without qualification, while other sub-sections expressly refer to ‘regular assessment’ and ‘provisional assessment’. It reasoned that provisional assessment under section 23B necessarily involves a determination of total income, albeit without exercising the powers under sections 22(4) and 23(2), and therefore amounts to an assessment. Consequently, the word ‘assessed’ in section 18A(3) must be given its ordinary meaning, encompassing every kind of assessment, including provisional assessment. The Court rejected the Revenue’s argument that ‘assessed’ meant only regular assessment, observing that Parliament could have added the word ‘regularly’ if that were its intent. On the question of whether the Indian Income-tax Act, 1961 could be used to interpret the earlier Act, the Supreme Court held that a subsequent Act is not a useful guide to the meaning of an earlier Act unless both deal with the same subject and the earlier provision is ambiguous; the 1961 Act did not intend to clarify the meaning of ‘assessee’ in section 18A(3) of the 1922 Act, and thus could not be relied upon. In the result, the Supreme Court dismissed the appeals, affirmed the High Court’s decision, and held that the respondents, having been provisionally assessed, were not persons ‘who had not hitherto been assessed’ and were therefore not required to send an estimate under section 18A(3). The levy of interest and penalty was accordingly unjustified.
Headnote
A) Income Tax - Advance Payment of Tax - Meaning of 'Assessed' in Section 18A(3) - Indian Income-tax Act, 1922, Sections 18A, 23, 23B - The expression 'any person who has not hitherto been assessed' in section 18A(3) does not exclude a person who has been provisionally assessed under section 23B; the word 'assessed' is used without qualification in section 18A(1) and should be given its ordinary meaning, encompassing all kinds of assessment including provisional assessment; the Act elsewhere uses 'provisional assessment' and 'regular assessment' specifically, so the unqualified term includes both; thus, a person who has been provisionally assessed is not liable to send an estimate under section 18A(3). Held, the levy of interest under section 18A(8) and penalty under section 18A(9)(b) was not justified. B) Statutory Interpretation - Subsequent Act as Aid to Construction - Indian Income-tax Act, 1961 - A subsequent Act cannot be used to interpret an earlier Act unless it is on the same subject and the earlier provision is ambiguous; the 1961 Act did not intend to clarify the meaning of 'assessee' in section 18A(3) of the 1922 Act and therefore cannot be resorted to for interpretation. Held, the High Court was right in not relying on the 1961 Act.
Issue of Consideration
Whether the expression 'any person who has not hitherto been assessed' in section 18A(3) of the Indian Income-tax Act, 1922 includes a person who has only been provisionally assessed under section 23B of that Act.
Final Decision
The Supreme Court dismissed the appeals, holding that the word 'assessed' in section 18A(3) of the Indian Income-tax Act, 1922 includes provisional assessment under section 23B, and therefore the respondents, who had been provisionally assessed, were not persons 'who had not hitherto been assessed' and were not liable to send estimates under section 18A(3). Consequently, the levy of interest under section 18A(8) and penalty under section 18A(9)(b) was unjustified.
Law Points
- Legal points not extracted
- Word 'assessed' in section 18A(3) includes provisional assessment
- Provisional assessment under section 23B is a determination of total income
- No warrant to restrict 'assessed' to only regular assessment
- Subsequent Act cannot be used to interpret earlier Act unless strict conditions met
- Legislature used 'regular assessment' and 'provisional assessment' expressly elsewhere
- so unqualified 'assessed' encompasses all types
