Somnath Iyer, J.
1. Whether an assessee who commits default in the payment of the advance tax demanded under section 18A of the Income-tax Act can be made liable to pay a penalty under the provisions of section 46(I) of the Act is the interesting question that arises in these two writ petitions.
2. The material facts are these :
3. The petitioner who had been previously assessed to income-tax was required under the provisions of section 18A of the Income-tax Act, to pay the advance tax for the assessment year 1955-56. On this committing default in the payment of such advance tax, the Income-tax Officer, under the provisions of section 46(I) of the Act, imposed a penalty of Rs. 490 by an order made by him or May 23, 1955. On the assessee continuing to be in default, the Income-tax Officer made a second order on September 3, 1955, imposing a further penalty of Rs. 1,000 under the provisions of Section 46(1A) of the Act.
4. These writ petitions are presented by the petitioner for certiorari to bring up and quash those orders made by the Income-tax Officer. Writ Petition No. 3 of 1957 is directed against the order made on May 23, 1955, while Writ Petition No. 4 of 1957 is directed against the order made of September 3, 1955.
5. The contention of the petitioner in these writ petitions is that the Income-tax Officer had no authority to imposed any penalty on the petitioner in respect of the default committed by him in the payment of the advance tax required to be paid under section 18A of the Act. The contention is that advance tax is not Income-tax and so the default committed by him in the payment of advance tax is not a default committed by him in making a payment of Income-tax and unless the assessee commits default in the payment of Income-tax, the provisions of section 46(I) of the Act are not attracted.
6. Mr. Srinivasan, the learned a advocate for the petitioner, has contended before us that it is only the tax determined after an assessment is made under section 23 of the Act, at rates prescribed by the relevant Finance Act, that can be called Income-tax. The tax required to be paid under the provisions of section 18A, not being a tax determined by an assessment under section 23 of the Act, is not, he urges, income-tax. So, the default committed by the petitioner in this case did not entail the imposition of any penalty under the provisions of section 46(1) of the Income-tax Act.
7. Mr. Srinivasan has also contended that Income-tax is the tax that is charged on the income of a person of the previous year and the advance tax being really a tax on the income of the year in which the advance tax is demanded, such advance tax cannot be regarded as income-tax. Mr. Srinivasan also contends that, in any event, the provisions of section 46(1) of the Income-tax Act are unconstitutional for the reason that an assessee in default is subject not only to a penalty under the provisions of section 46(1) of the Act but is also required by section 18A(8) of the Act to pay interest on the amount not paid by him.
8. If Mr. Srinivasan's contention is right that the advance tax required to be paid under section 18A if the Act is not Income-tax, the orders of the Income-tax Officer are liable to be quashed. The question, therefore, is whether the advance tax which the assessee in this case was required to pay under the provisions of section 18A of the Act can be regarded as income-tax for the omission to pay which the Income-tax Officer may imposed a penalty under section 46(1) of the Act.
9. In support of his contention that advance tax is not income-tax. Mr. Srinivasan has strongly relied on sub-section (1) of section 18A of the Act in which the advance tax that could be demanded of an assessee is not described as income-tax but is referred to only as an amount equal to one-quarter of the Income-tax and super-tax payable on so much of the assessee as is included in his total income of the latest previous year in respect of which he has been assessed. Mr. Srinivasan contends that if such advance tax was also income-tax, section 18A would have described it as income-tax and not merely as an amount equal to the proportionate income-tax or super-tax referred to in that section. Mr. Srinivasan also depended strongly on the contrast existing between the language of section 18 of the Act in which the tax directed to be deducted at source is described expressly as income-tax, whereas in section 18A of the Act it is not so described.
10. An examination of the provisions of section 18A of the Act reveals that although under the Income-tax Act it is the income of the previous year of the assessee that is subject to the payment of income-tax, section 18A provides, in effect, for payment of tax by a person on his income of the very year in which the advance tax is required to be paid. As provided by sub-section (11) of section 18A, such advance tax, if paid by him shall be treated as payment of tax in respect of the income of the year. It is, of course, clear from the provisions of section 18A that such advance payment of the tax becomes due as a result of what may be described as a provisional assessment, the assessee being entitled to a refund if the amount of tax paid by him is in excess of the tax actually payable as determined by the Income-tax Officer in the regular assessment he has to make during the next financial year.
11. Mr. Srinivasan does not seriously dispute that the advance tax demanded of as assessee under section 18A is a tax. Indeed, if he had disputed it he would have been quite unable to sustain that contention. In section 18A and in almost every sub-section of that section the amount to be paid in advance is referred to as a tax. In clause (b) of sub-section (1) of that section which provides for the issue of a notice of demand for its payment, it is expressly referred to as the tax that shall be payable under that section.
12. In Joint Official Liquidators of the Peerdan Juharmal Bank Ltd. v. Commissioner of Income-tax this is what Rajamannar, C.J., said about it :
'It is impossible to accept the contention of Mr. Vidyasankar that the amount demanded as advance income-tax under section 18A of the Income-tax Act is not a tax. 'A tax in the general understanding of the term.... signifies as exaction for the support of the Government' : Vide United States v. Butler. The primary meaning and object of taxation is raising money for the purpose of Government by means of contributions from individual person : vide King v. Barger. Coley in his Constitutional Law at page 61 defines taxes thus :
'The word 'taxes' in its most enlarged sense embraces all the regular imposition made by Government upon the person, property, privileges, occupations and enjoyments of the people for the purpose of raising public revenue.' There can be no doubt whatever that the amount imposed and demanded as advance income-tax is a tax within the accepted meaning of that term'.
13. But the learned Chief Justice did not proceed to consider whether such advance tax was also income-tax. A discussion of that question was, in the circumstances of that case, unnecessary.
14. Now, it is well settled that income-tax is a tax upon a person in relation to its income. That was what Beaumont, said in the Patiala State Bank case. At page 112 the learned Chief Justice observed :
'I think that, properly considered, income-tax is a tax on a person in relation to his income. The tax is not imposed on income generally; it is imposed on the income of a person, natural or artificial, as defined in section 3. The assessment has to be made against a person, and the tax has to be collected from the assessee. The tax is not made a charge on the income upon which it is levied, and I Think, broadly speaking it is accurate to say that income-tax is a tax imposed upon a person in relation to his income'.
15. The view taken by that learned Chief Justice in that case was upheld by their Lordships of the Privy Council in Patiala State Bank v. Commissioner of Income-tax.
16. If therefore in this case it could be said that the advance tax that has to be paid under section 18A can be regarded as a tax upon the assessee in respect of, or in relation to, his income, there could be no difficulty in coming to the conclusion that such advance tax is income-tax.
17. The question therefore is whether it is a tax in relation to the income of the assessee. Mr. Chandrasekhar, the learned Government Pleader, contends that it is. The provisions of section 18 and section 18A, which according to him are complementary to one another, make it clear that the tax payable in advance is a tax in relation to the income of an assessee.
18. A close examination of sections 18 and 18A of the Act will indicate that both those sections make provision for what may be described as a provisional assessment of an assessee's income of the very year in which the deduction of the tax under section 18 or the payment of the advance tax under section 18A gas to be made. Section 18A opens with the words 'in the case of income'. In both the cases, it is not the income of the previous year of the assessee in respect of which the tax has to be deducted or paid but the income of the assessee relating to the very financial year to which those two section refer. As section 18A itself states, it provides for the payment of advance tax in the case of the income of an assessee for which not provision has been made under section 18 of the Act. In other words, in the case of the income of an assessee in respect of which the deduction of tax at source is not provided for by section 18 of the Act, section 18A provides for the payment of tax on such income in advance. That is exactly the meaning of the marginal note to section 18A which contains the words 'advance payment of tax'.
19. There can thus be no doubt that tax deducted at source under the provisions of section 18 of the Act is also in effect advance payment of tax, deduction at source being merely a mode of collecting such tax in advance.
20. Sections 18 and 18A of the Act contain many provisions which are similar. While section 18(6) provides for the payment of the sums of money deducted under the provisions of that section to the credit of the account of the Central Government, section 18A(1)(a) requires an assessee to pay to the credit of the Central Government on the dates specified in that sub-section the advance tax required to be paid by him. Similarly, while section 18(5) of the Act provides that the deducted tax paid to the account of the Central Government in accordance with the provisions of that section shall be treated as payment of Income-tax on behalf of the person from whose income deduction was made and that such credit shall be given to him therefore in the assessment, if any, made for the following year, sub-section (11) of section 18A of the Act makes similar provision that the advance tax paid under section 18A shall be treated as payment of tax in respect of the assessment for the subsequent financial year and that credit therefor shall be given to the assessee in the regular assessment.
21. While section 18(7) provides that an employer who fails to deduct or pay the income-tax as required by that section shall be deemed to be an assessee in default in respect of the tax, section 18A(10) provides that an assessee who fails to pay the advance tax shall similarly be deemed to be an assessee in default in respect of the instalments required by him to be paid.
22. The similarity between the provisions of section 18 and 18A referred to above is, to my mind, very significant particularly when it is remembered that section 18A contains provisions which as that section itself states are applicable to income in respect of which provision is not made under section 18 for deduction of income-tax. In other words, section 18A provides for the payment and recovery of a tax in relation to the income of the assessee for which no provisions is made for deduction of tax at source. It is, therefore, obvious that the tax deducted at source under section 18 and the advance tax payable under section 18A are both taxes in relation to the income of the assessee and, conforming as they do to the definition given by Beaumont, in the Patiala State Bank case, must be regarded as income-tax. Further, the tax deducted under section 18 and that payable under section 18A are clearly taxes of the same character and if the tax deducted at source under section 18 is income-tax as the section itself states - and Mr. Srinivasan does not dispute that it is so - it would be logical to hold that the advance tax payable under section 18A is not Income-tax but some other kind of tax.
23. That that would be the true position would be clear from clause (b) of sub-section (1) of section 18A of the Act, which provides that in respect of the advance tax required to be paid under that section, a notice of demand has to be issued under section 29 of the Act. Section 29 of the Act reads :
'Notice of demand. - When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in prescribed form specifying the sum so payable'.
24. If has notice of demand in that regard has to be issued under section 29, it is, I think, abundantly clear that the amount demanded by that notice is a tax. If what is demanded under section 18A is admittedly a tax, no other tax being payable by an assessee under the provisions of the other than income-tax or super-tax, the tax so required to be paid in a notice of demand issued under section 29 of the Act is, it is plain, Income-tax Act or super-tax.
25. Indeed that that would be the correct view to take is also clear from rule 20A of the Rules framed under section 59 of the Act which prescribes the form in which the notice of demand has to be issued when the advance tax is payable under section 18A of the Act. Clauses 6 and 7 of the Form clearly give intimation to the assessee that if he committed default in the payment of the advance tax payable by him, he would be treated as a defaulter liable to pay a penalty under the provisions of section 46(1) of the Act.
26. Mr. Srinivasan found himself in great difficulty in telling us what kind of tax was the tax which is required to be paid as advance tax if it is not income-tax or super-tax.
27. It appears to my mind that section 19 of the Act also contain an indication that what is payable under section 18A is in the nature of income-tax although section 18A did not itself call it so. Section 19 reads :
'In the case of income in respect of which provision is not made under section 18 of income-tax at the time of payment, and in any case where income-tax has not been deducted in accordance with the provision of section 18, Income-tax shall be payable by the assessee direct'.
28. The cases coming under section 18A are not cases in which any provision is made under section 18 of the Act for deduction of income-tax has not been deducted in accordance with the provisions of section 18. They are not cases coming under either of those categories and therefore they are cases in which income-tax shall be payable by the assessee direct. It appears to me that the payment to be made by the assessee direct, not only includes the payment of the tax after an assessment has been made under section 23 of the Act but also the payment to be made in accordance with an order made under section 18A of the Act; and if the payment referred to in section 19 of the Act includes such payment, it is clear that the amount to be paid is income-tax as section 19 expressly calls it.
29. But, Mr. Srinivasan has pointed out to us that there are some features of the advance tax payable under section 18A which are inconsistent with the hypothesis that such tax is income-tax. In the first place, he points out to us that under sub-section (5) of section 18A, an assessee who pays such advance tax is entitled to interest at the rates referred to in that section. Mr. Srinivasan also contends that the provisions for payment of interest by the assessee who commits default in the payment of advance tax contained in sub-section (8) of section 18A is similarly inconsistent with the supposition that advance tax is income-tax. It is no doubt true that in the case of tax deducted at source under section 18, corresponding provisions are not contained in the Act. But to my mind it appears that the mere fact that interest is payable either by the Central Government in the one case or by an assessee in another does not make the advance tax any the less income-tax. In the one case Government pays interest to the assessee since it had the use of the money paid by the assessee as advance tax. In the other, the assessee pays interest to the Government by reason of his having withheld from the Government the advance tax he was bound to pay. One is the natural corollary of the other. But the mere fact that such interest is payable to or by the assessee does not in any way alter the character of the advance tax paid which, as I have already held, must be regarded as income-tax.
30. If the advance tax demanded of the assessee in these two cases has to be regarded as income-tax, it is not disputed by Mr. Srinivasan that the order made by the Income-tax Officer imposing penalties on the petitioner under section 46(1) and 46(1A) of the Act were entirely within his competence. In my opinion, the contention urged on behalf of the petitioner that the amount demanded of him under section 18A could not be regarded as income-tax, has to be rejected as unsound. That is the conclusion, in my opinion, to be reached not with standing the fact that the word 'amount' occurs in section 18A of the Act in the place where that section provides for the quantification of the advance tax payable by the assessee.
31. It seems to me that there is no substance in the contention of Mr. Srinivasan that since the relevant Finance Act referred to in section 3 of the Act would not have been enacted in the financial year in which the advance tax is demanded, such advance tax cannot be regarded as income-tax. All that section 3 of the Act provides is that where any Central Act exacts that Income-tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, the Act in respect of the total income of the previous year of every assessee. It is, I think, plain that the enactment of the Finance Act referred to in section 3 of the Income-tax Act would, subject to the provision of section 67B of the Income-tax Act, be necessary only for the determination of the tax to be determined in as assessment under section 23 of the Act.
32. Mr. Srinivasan made a feeble attempt to contend that the provisions of section 46(1) of the Act are unconstitutional as they amount to an infringement of the provisions of article 14 of the Constitution. His argument is that sub-section (8) of section 18A of the Act provides for payment of interest by a defaulting assessee while section 46(1) of the Act also provides for the imposition of a penalty on him. Mr. Srinivasan urges that the fact that an Income-tax Officer is empowered to imposed a penalty and also to recover interest from the assessee in respect of one and the same default, amounts to an infraction of the equal protection of laws clause embodied in article 14 of the Constitution. I am wholly unable to accept this contention. As Mr. Chandrasekhar has urged sub-section (8) of section 18A of the Act provides only for payment of interest on the tax payable to Government which the assessee wrongfully withheld, while section 46(1) of the Act provides for the imposition of a penalty which is in the nature of a punishment. How the fact that an Income-tax Officer can recover interest under section 18A of the Act and also imposed a penalty under section 46(1) of the Act violates the provisions of article 14 of the Constitution is extremely difficult to understand. To my mind the argument is devoid of substance and has to be rejected.
33. These two writ petitions fail and are dismissed. The petitioner shall pay to respondent No. 1 costs in W.P .No. 3 of 1957. There will be no order as to costs in W.P. No. 4 of 1957. (Advocate's fee, Rs. 100).
34. Petition dismissed.