Income-tax Act (XI of 1922)--

----S. 45-A---Scope and application of S. 45-A---Words " to the date of its payment"---Connotation---No tax due from him was paid by the assessee by the time the order levying additional tax was passed hence the terminal end of the time upto which the additional tax was payable, was not available-- Quantification of additional tax to be levied under S. 45-A thus was not possible---Order of Income-tax Officer imposing additional tax, could not, therefore, be held to be proper, valid and legal order which was rightly annulled by the Tribunal.

1961 Tax 371 fol.

1971 PTD 200 ref.

Nasrullah Awan for Applicant.

Iqbal Naeem Pasha for Respondent.

Date of hearing: 19th September, 1991.

JUDGMENT

MAMOON KAZI, J.---The respondent is a private limited company deriving income from dividends. A return of income-tax was filed by the respondent pertaining to the year from 1-1-1976 to 30-11-1976 when the Income-tax Officer who dealt with the case found that the respondent had failed to pay its admitted income-tax liability under section 22-A of the income-tax Act 1922 and hence it was liable to pay additional tax under section 45-A(2)(1) of the said Act. The respondent went in appeal before the learned Assistant Commissioner of Income-tax who upheld the I.T.O's. order and dismissed the appeal. The respondent then appealed before the learned Income-tax Appellate Tribunal which upheld the appeal and set aside the order of the Assistant Commissioner.

2. The applicant was however not satisfied with the order passed by the Tribunal and he requested it to refer the question of law arising out of the decision of the Tribunal to this Court. Consequently, the following question has been referred to us for our decision:--

"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified to hold that in the absence of terminal date upto which the additional tax was payable, the additional tax tinder section 45-A of the repealed Act, could not be levied?"

3. Sections 22-A and 45-A of this repealed Income-tax Act, 1922 provided as follows:--

"22-A. Every person who is required to furnish a return tinder subsection (1) of section 22 shall pay on or before the date on which he furnishes such return the amount of tax payable on the basis of the said return 'is reduced by the amount of any tax already deducted from his income under section 18 or paid by him under section 18-A."

"45-A. Where any assessee--

(a) fails to pay the tax due from him, or

(b) has paid tax under section 22-A and the tax so paid is less than 80 per cent of the tax payable as a result of completion of the relevant assessment under section 23, he shall, without prejudice to his liability under any other provisions of law, pay an additional amount of tax equal to eight per cent per annum of: -

(i) in cases referred to in clause (a), the amount of tax due from him from the, date on or before which it was originally made payable (hereinafter in this section referred to as the said date) to the date of its payment;

(ii) in cases referred to in clause (b), the amount by which the tax paid under section 22-A falls short of 80 per cent of tax payable under section 23, from the date of payment of the tax under section 22-A to the date of completion of the assessment under section 23;

Provided that where at the request of the assessee, the tax is allowed to be paid in instalments, such additional amount of tax shall be payable in respect of each instalment from the said date to the date on which it is paid:

Provided further that where, upon an appeal under section 33, or revision under section 33-A, or a reference to the High Court under section 66, or an appeal to the Supreme Court under section 66-A, the amount on which tax was payable under this section is reduced, the additional amount of tax shall be reduced accordingly and the additional amount paid in excess, if any, shall be refunded together with the amount of tax that is refundable."

4. The learned Tribunal while interpreting the said provisions agreed w7th the contentions raised on behalf of the assessee and decided the appeal in his favour. The following conclusions were drawn by the learned Tribunal:--

"Here also we rind that in view of the admitted fact that no tax due from him was paid by the assessee by the time of the order levying additional tax was passed and hence the terminal end of the time upto which the additional tax was payable was not available. Consequently the quantification of additional tax to be levied under section 45-A was not possible. The order of the Income-Tax Officer imposing additional tax cannot, therefore, be held to be proper, valid and legal. It is, therefore, hereby annulled."

5. We find that the provisions of section 45-A have been rightly interpreted by the learned Tribunal in its said order, dated 3-8-1978. The said section contemplates two kinds of situations, viz. (a) where an assessee fails to pay tax due from him, and (b) where he has paid tax under section 22-A and the tax so paid is less than 80% of the tax payable. In both the cases, an additional amount of tax equal to eight per cent per annum would be chargeable from him. The present case falls within the purview of section 45-A(a) as the assessee had failed to pay tax due from him. In that case, according to paragraph(i) of the said section, the additional amount of tax due would become chargeable from the date on or before which it was original made payable to the date of its payment. The words "to the date of its payment" occurring in paragraph (i) clearly indicate that provisions of section 45-A(a)(i) would apply only to a case where payment has actually been made by an assessee. Admittedly, in the present case since no tax was paid by the assessee such date was not available to the ITO on the basis of which assessment could be made by him. Although Mr. Nasrullah Awan learned counsel for the applicant has argued that the assessee should not be permitted to take advantage of his own wrong but Mr. Iqbal Naeem Pasha, learned counsel for the respondents, has invited our attention to section 46 of the Income Tax Act, according to which, a sum not exceeding the amount of tax would be recoverable from the assessee by way of penalty in case the assessee makes default in making payment of tax. The learned counsel has therefore argued that where the assessee has failed to pay tax, he may be proceeded against under section 46 but his case in no case can fall within the purview of section 45-A. Mr. Iqbal Naeem Pasha has also invited our attention to section 88 of the new Income Tax Ordinance 1979 wherein although the original provisions of section 45-A with slight alteration have been incorporated but it appears that the legislature had become aware of the lacuna left in section 45-A of the repealed Act, therefore, the following words were added in section 88 of the new Act:--

"to the date on which the tax is paid or the date on which an order under subsection (1) of section 59, section 59-A, section 62, section 63 or section 65, as the case may be, is made, whichever is the earlier."

Reference has also been made by Mr. Iqbal Naeem Pasha to the case of Hirjina & Co. (Pakistan) Limited Karachi v. Commissioner of Sale Tax Central Karachi 1971 PTD 200, where a question somewhat analogous to the point in issue in the present case had arisen before the Supreme Court and it was observed as follows:-

"Apart from this, we are unable to read the earlier definition in the manner suggested by the Department. It was said in the course of argument that notwithstanding the amendment it must be assumed that the previous definition of `sale price' included Provincial Excise Duty. The previous definition, however, does not expressly say so. We may here observe that interpreting the taxing statute the Courts must look to the words of the statute and interpret it in the light of what is clearly expressed. It cannot imply anything which is not expressed, it cannot import provisions in the statute so as to support assumed deficiency. On the other hand the fact that the Legislature made an express provision for including the excise duty indicates that the unamended definition of the `sale price' did not include the Provincial Excise Duty."

Mr. Iqbal Naeem Pasha has also referred to the case of S. Narayanappa and brothers v. Commissioner of Income Tax Mysore 1961 Tax 371 and our attention has been invited by the learned counsel to the following observations made in this case:

"In the portion specifying the maximum penalty which may be imposed on an assessee under section 38(I)(b), the words `a sum not exceeding one and a half times the amount of the income tax and super-tax, if any, which would have been avoided if the income as returned by such, person had been accepted as the correct income' occur. The words `the income as returned by such person' are unambiguous and make it clear that for the imposition of penalty under section 28(I)(b) the indispensable condition precedent is that before the assessee commits the default referred to in section 28(I)(b) such default must have been preceded by the production of a return under section 22(2). If the assessee has not furnished any such return, it would not be possible for the Income-tax Officer to measure the penalty with reference to any maximum, the determination of the maximum itself being the one which he would not find it possible to do."

In our opinion the second case referred to by Mr. Iqbal Naeem Pasha clearly supports the above interpretation of section 45-A by the learned Tribunal and now by us.

6. We accordingly find ourselves in agreement with the interpretation of section 45-A made by the learned Tribunal, and therefore, we answer the reference in the affirmative. The parties are left to bear their own costs.

M.BA/C-249/K Question answered in the affirmative.