1. These two references under Sub-section (1) of Section 66 Income-tax Act, raise a common question of law viz., whether a person who fails to comply with the provisions of Section 18A(3) can be punished under the provisions of Section 28(1) of the said Act.
2. Two persons, who were not previously assessed to income-tax, submitted returns of their in-come 'suo motu' under the provisions of Section 18A, income-tax Act As these returns were submitted after the 15th day of March, the Income-tax authorities imposed certain penalties under theprovisions of Sub-section (9) of Section 18A read with Section 28, Income-tax Act.
The Appellate Tribunal set aside the order of the Commissioner of Income-tax and referred the following question to this Court under the provisions of Sub-section (1) of Section 66, Income-tax Act:
'Whether on a true construction of the terms of Sub-section (9) of Section 18A and of Section 28, Income-tax Act, 1922, penalty can be imposed for non-compliance with the requirements of Sub-section (3) of Section 18A of that Act?'
3. Sub-section (9) of Section 18A may for convenience be split up into two parts. The first part provides that if the Income-tax Officer is satisfied that any assessee had furnished under Sub-section (2) or Sub-section (3) of Section 18A estimates of the tax payable by him which he knew or had reason to believe to bo untrue, the assessee shall be deemed to have deliberately furnished inaccurate particulars of his income, and the provisions of Section 28, so far as may be, shall apply accordingly.
Section 28(1) (c) declares that if a person has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income he shall be liable to pay the penalty set out] in the body of the section. There can be little doubt that a person who contravenes the provisions of Section 18A (9) (a) can be punished 'under the provisions of Section 28(1) (c).
4. The second part of Sub-section (9), however presents a certain amount of difficulty. It declares that if the Income-tax Officer is satisfied that any assessee has failed to comply with the provisions of Sub-section (3), the assessee shall be deemed to have failed to furnish the return of his total income; and the provisions of Section 28, so far as may be shall apply accordingly.
Section 28 does undoubtedly prescribe a penalty for a person who fails to furnish the return of his total income, but it is not every failure on his part to furnish the return of his total income that renders him liable to punishment under Section 28. He can be punished only (a) if he fails to furnish the return of his total income which he was required to furnish by notice given under Sub-section (1) or Sub-section (2) of Section 22 or Section 34; or (b) if he fails to furnish the said return within the time allowed and in the manner required by the notice.
Neither of these two contingencies can arise in the case of an estimate required under Section 18-A (3). In the first place, a person who fails to send an estimate under Section 18-A (3) cannot be said to have failed to furnish the return of his total in-come which he was required to furnish in response to a notice issued under Section 22 or Section 34; secondly, the said person cannot be said to have failed to furnish it within the time allowed and in the manner required by such notice, for estimates under Section 18-A(3) must be furnished before the 15th March in the financial year immediately pre-ceding the year of assessment whereas the returns required by the notices under Ss. 22 and 34 can be furnished at later dates.
5. It is a well-known rule of interpretation that the express mention of one thing implies the exclusion of another and it follows as a consequence that if a statute enumerates the circumstances under which liability to punishment is to arise, it can arise only if those circumstances exist and in no other. Again, where a statute imposes a tax which is in effect a penalty it should be strictly construed.
If it is capable of two reasonable but contradictory constructions, one in favour of the taxpayer and the other in favour of the State, then the construction which operates in favour of the tax-payer should be preferred. It has been held repeatedly that a Court should be slow in enlarging the scope of a provision by implication or analogy; and if a well rounded doubt arises whether a particular act is or is not an offence, the doubt should if possible, be resolved in favour of the tax-payer.
In 'Vestey's (Lord) Executors v. Inland Revenue Commrs.', (1949) 1 All ER 1108, at p. 1120; (A) Lord Normand observed:--
'Parliament in its attempts to keep pace with tile ingenuity devoted to tax avoidance may fall short of its purpose. That is a misfortune for the tax-payers who do not try to avoid their share of the burden, and it is disappointing to the Inland Revenue. But the Court will not stretch the terms of taxing Acts in order to improve on the efforts of Parliament and to stop gaps which are left open by the statutes.
Tax avoidance is an evil, but it would be the beginning of much greater evils if the Courts were to overstretch the language of the statute in order to subject to taxation people of whom they disapproved.'
If the Legislature intended that a person who fails to comply with the provisions of Section 18-A (3) should be punished under provisions of Section 28, the language which it has chosen to employ appears to me to be most inadequate.
6. For these reasons, I am of the opinion that the question propounded by the Tribunal must be answered in the negative.
7. I agree.