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Mathai Mappila and Tom Cyriac Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax References Nos. 91, 92, 94, 95, 96-98 and 146-148 of 1997
Judge
Reported in[2000]243ITR326(Ker)
ActsIncome-tax Act, 1961 - Sections 209A(1), 209A(4), 210, 212(3A), 218(1), 218(2), 221, 273, 273(1) and 273(2)
AppellantMathai Mappila and Tom Cyriac
RespondentCommissioner of Income-tax
Appellant Advocate N.D. Premachandran, Adv.
Respondent Advocate P.K.R. Menon and; George K. George, Advs.
Cases ReferredC) and Indian Aluminium Co. v. Kerala State Electricity Board
Excerpt:
.....199 itr 654 (guj) applied. application: not to current assessment year decision: in favour of assessee9 assessment year: 1985-86, 1987-88 & 1988-89 income tax act 1961 s.273 - - the common question referred for the opinion of this court under section 256(1) of the income-tax act, 1961 (in short 'the act') is as follows :whether, on the facts and in the circumstances of the case, the tribunal was justified in law in upholding the imposition of penalty under section 273(1)(b) of the income-tax act where the assessee having filed the estimate of advance tax payable by him before the due date but failed to remit the advance tax in accordance with the estimate ?' 2. it is to be noted that income-tax references nos. ' 273. (1) if the income-tax officer in the course of any..........but the essence of dispute is the same. in i. t. r. nos. 96 to 98 of 1997 relating to the assessment years 1985-86, 1987-88 and 1988-89, the question referred is as follows : 'whether, on the facts and in the circumstances of the case, the income-tax appellate tribunal was right in relying on the marginal notes of section 273 for confirming the levy of penalty under section 273(2)(c) of the income-tax act, 1961, for the assessment year 1985-86 and under section 275(1)(b) of the said act for the assessment years 1987-88 and 1988-89?' 3. after having' heard learned counsel for the parties, we reframe the questions referred in i. t. r. nos. 146, 147 and 148 of 1997 to read the same as the question referred in i. t. r. nos. 91, 92, 94 and 95 of 1997.4. the factual background is.....
Judgment:

Arijit Pasayat, C.J.

1. In all these applications, a common point of dispute is involved, though they relate to different assessment years in respect of four assessees. The common question referred for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 (in short 'the Act') is as follows :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the imposition of penalty under Section 273(1)(b) of the Income-tax Act where the assessee having filed the estimate of advance tax payable by him before the due date but failed to remit the advance tax in accordance with the estimate ?'

2. It is to be noted that Income-tax References Nos. 91, 92, 94 and 95 of 1997 relate to the above question. Additionally, in I. T. R. Nos. 96 to 98, 146, 147 and 148 of 1997, the other questions have been referred, but the essence of dispute is the same. In I. T. R. Nos. 96 to 98 of 1997 relating to the assessment years 1985-86, 1987-88 and 1988-89, the question referred is as follows :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in relying on the marginal notes of Section 273 for confirming the levy of penalty under Section 273(2)(c) of the Income-tax Act, 1961, for the assessment year 1985-86 and under Section 275(1)(b) of the said Act for the assessment years 1987-88 and 1988-89?'

3. After having' heard learned counsel for the parties, we reframe the questions referred in I. T. R. Nos. 146, 147 and 148 of 1997 to read the same as the question referred in I. T. R. Nos. 91, 92, 94 and 95 of 1997.

4. The factual background is unnecessary to be referred to in detail. In each case, the factual position is that the assessee had furnished a statement of advance tax as the case may be, within the stipulated time, but had not paid the advance tax in accordance with the same. The controversy is whether the payment of advance tax is also necessary in the background of Section 209A of the Act. In each case, the Assessing Officer levied penalty under Section 273(1)(b) for default in not remitting the advance tax even though estimate had been filed. That, according to him, amounted to non-compliance with the provisions of Section 209A. In I.T.R. No. 97 of 1997, penalty has been levied under Section 273(2)(c) of the Act. The Commissioner of Income-tax (Appeals) (in short, 'the CIT(A)'), confirmed the penalties. The levy was also upheld by the Tribunal. The stands of the assessee and the Revenue before the authorities were that filing of estimate itself is sufficient and non-payment of advance tax is of no consequence ; and, that mere filing of estimate is not sufficient and payment of advance tax is also a requirement respectively. At the time of hearing of the applications, stands of the respective parties, as taken before the authorities below, were reiterated.

5. For a resolution of controversy, it is necessary to take note of the provisions contained in Sections 209A, 273(1)(b) and 273(2)(c) of the Act. They read as follows at the relevant time :

'209A. Computation and payment of advance tax by assessee.--(1) Every person shall, in each financial year, on or before the date on which the first instalment, or where he has not previously been assessed by way of regular assessment under this Act, on or before the date on which the last instalment of advance tax is due in his case under Sub-section (1) of Section 211, if his current income is likely to exceed the amount specified in Sub-section (2) of Section 208, send to the Income-tax Officer-

(a) where he has been previously assessed by way of regular assessment under this Act, a statement of advance tax payable by him computed in the manner laid down in Clause (a) or, as the case may be, Sub-clause (i) of Clause (d) of Sub-section (1) of Section 209, or

(b) where he has not previously been assessed by way of regular assessment under this Act, an estimate of-

(i) the current income, and

(ii) the advance tax payable by him on the current income calculated in the manner laid down in Section 209, and shall pay such amount of advance tax,--

(I) in a case falling under Clause (a), as accords with the statement in equal instalments on the dates applicable in his case under Section 211; and

(II) in a case falling under Clause (b), as accords with the estimate in equal instalments on such of the dates applicable in his case as have not expired, or in one sum if only the last of such dates has not expired.

(2) Where an assessee who is required to send a statement under clause (a) of Sub-section (1) estimates on or before the date on which the first instalment of advance tax is due in his case under Sub-section (1) of Section 211 that, by reason of his current income being likely to be less than the income on which advance tax is payable by him under Sub-section (1) or for any other reason, the amount of advance tax computed in the manner laid down in Section 209 on the current income would be less than the amount of advance tax payable by him under Sub-section (1), he may send to the Income-tax Officer, in lieu of such statement, an estimate of-

(i) the current income, and

(ii) the advance tax payable by him on the current income calculated in the manner laid down in Section 209,

and shall pay such amount of advance tax as accords with his estimate in equal instalments on the dates applicable in his case under Section 211.

(3) Where an assessee who has sent a statement under Clause (a) of Sub-section (1) estimates on or before the date on which the last instalment of advance tax is due in his case that, by reason of his current income being likely to be less than the income on which advance tax is payable by him under Sub-section (1) or for any other reason, the amount of advance tax computed in the manner laid down in Section 209 on the current income would be less than the amount of advance tax payable by him under Sub-section (1), he may, at his option, send to the Income-tax Officer an estimate of-

(i) the current income, and

(ii) the advance tax payable by him on the current income calculated in the manner laid down in Section 209,

and shall pay such amount of advance tax as accords with his estimate in equal instalments on such of the dates applicable in his case under Section 211 as have not expired, or in one sum if only the last of such dates has not expired.

(4) In the case of any assessee who is liable to pay advance tax under Sub-section (1) or Sub-section (2) or, as the case may be, Sub-section (3), if,by reason of the current income being likely to be greater than the income on which the advance tax so payable by him has been computed or for any other reason, the amount of advance tax computed in the manner laid down in Section 209 on the current income (which shall be estimated by the assessee) exceeds the amount of advance tax so payable by him by more than 33 1/3 per cent of the latter amount, he shall, on or before the date on which the last instalment of advance tax is payable by him, send to the Income-tax Officer an estimate of-

(i) the current income, and

(ii) the advance tax payable by him on the current income calculated in the manner laid down in Section 209,

and shall pay such amount of advance tax as accords with his estimate on such of the dates applicable in his case under Section 211 as have not expired, by instalments which may be revised according to subsection (5) :

Provided that in a case where the Commissioner is satisfied that, having regard to the nature of the business carried on by the assessee and the date of expiry of the previous year in respect of such business, it will be difficult for the assessee to furnish the estimate required to be furnished by him in accordance with the provisions of this sub-section on or before the date on which the last instalment of advance tax is due in his case, he may, if the assessee pays the advance tax which he is liable to pay under Sub-section (1) or Sub-section (2) or, as the case may be, Sub-section (3) on or before such date, extend the date for furnishing such estimate up to a period of 30 days immediately following the last date of the previous year in respect of that business and, where the date is so extended, the assessee shall pay, on or before the date as so extended, the amount by which the advance tax already paid by him falls short of the advance tax payable in accordance with his estimate :

Provided further that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the figures and words '331/3 per cent.', the figures and words '20 per cent.' had been substituted.

(5) The assessee may send a revised estimate of the advance tax payable by him on or before any one of the dates specified in Section 211 and adjust any excess or deficiency in respect of any instalment already paid in a subsequent instalment or in subsequent instalments.

(6) Every statement or estimate under this section shall be sent in the prescribed form and verified in the prescribed manner.

Explanation.--For the purposes of this section and Section 212, 'current income', in relation to the advance tax payable by an assessee during any financial year, means the total income of the assessee (exclusive of capital gains and income referred to in Sub-clause (ix) of Clause (24) of section 2, if any) of the period which would be the previous year for the assessment year immediately following that financial year.'

'273. (1) If the Income-tax Officer in the course of any proceedings in connection with the regular assessment for any assessment year, is satisfied that any assessee-

(a) has furnished under Clause (a) of Sub-section (1) of Section 209A a statement of the advance tax payable by him which he knew or had reason to believe to be untrue, or

(b) has failed to furnish a statement of the advance tax payable by him in accordance with the provisions of Clause (a) of Sub-section (1) of Section 209A,

he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum-

(i) which, in the case referred to in Clause (a), shall not be less than 10 per cent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of Chapter XVIIC falls short of-

(1) 75 per cent. of the assessed tax as defined in Sub-section (5) of Section 215, or

(2) the amount which would have been payable by way of advance tax if the assessee had furnished a correct and complete statement in accordance with the provisions of Clause (a) of Sub-section (1) of Section 209A,

whichever is less ;

(i) which, in the case referred to in clause (b), shall not be less than 10 per cent. but shall not exceed one and a half times of 75 per cent. of the assessed tax as defined in Sub-section (5) of Section 215 :

Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words 'seventy-five per cent.', at both the places where they occur, the words 'eight-three and one-third per cent.' had been substituted.

(2) If the Assessing Officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of April, 1970, or any subsequent assessment year, is satisfied that any assessee-

(a) has furnished under Sub-section (1) or Sub-section (2) or Sub-section (3) or Sub-section (5) of Section 209A, or under Sub-section (1) or subsection (2) of Section 212, an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or

(aa) has furnished under Sub-section (4) of Section 209A or under Sub-section (3A) of Section 212 an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or

(b) has failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of Clause (b) of Sub-section (1) of Section 209A, or

(c) has failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of Sub-section (4) of Section 209A or Sub-section (3A) of Section 212,

he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum-

(i) which, in the case referred to in Clause (a), shall not be less than 10 per cent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of the Chapter XVII-C falls short of-

(1) 75 per cent. of the assessed tax as defined in Sub-section (5) of Section 215, or

(2) where a statement under Clause (a) of Sub-section (1) of Section 209A was furnished by the assessee or where a notice under Section 210 was issued to the assessee, the amount payable under such statement or, as the case may be, such notice,

whichever is less ;

(ia) which, in the case referred to in Clause (aa), shall not be less than 10 per cent. but shall not exceed one and a half times the amount by which the tax actually paid during the financial year immediately preceding the assessment year under the provisions of Chapter XVII-C falls short of 75 per cent. of the assessed tax as defined in Sub-section (5) of Section 215 ;

(ii) which, in the case referred to in Clause (b) shall not be less than 10 per cent. but shall not exceed one and a half times of 75 per cent. of the assessed tax as defined in Sub-section (5) of Section 215 ; and

(iii) which, in the case referred to in Clause (c), shall not be less than 10 per cent. but shall not exceed one and a half times the amount by which-

(a) where the assessee had sent a statement under Clause (a), or an estimate under Clause (b), of Sub-section (1) of Section 209A or an estimate in lieu of a statement under Sub-section (2) of that section, the tax payable in accordance with such statement or estimate ; or

(b) where the assessee was required to pay advance tax in accordance with the notice issued to him under Section 210, the tax payable under such notice,

falls short of 75 per cent. of the assessed tax as defined in Sub-section (5) of Section 215 :

Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect as if for the words 'seventy-five per cent', whereever they occur, the words 'eight-three and one-third per cent.' had been substituted.

Explanation 1.--For the purposes of Clause (ia) the amount paid by the assessee on or before the date extended by the Chief Commissioner or Commissioner under the first proviso to Sub-section (4) of Section 209A or, as the case may be, first proviso to Sub-section (3A) of Section 212 shall, where the date so extended falls beyond the financial year immediately preceding the assessment year, also be regarded as tax actually paid during that financial year.

Explanation 2.--When the person liable to penalty is a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, then, notwithstanding anything contained in the other provisions of this Act, the penalty imposable under this section shall be the same amount as would be imposable on that firm if that firm were an unregistered firm.

(3) The provisions of this section shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.'

6. What has been contemplated under Section 273 to be culpable or blameworthy is knowingly furnishing of untrue statement/estimate or non-furnishing. Up to September 9, 1986, the position was that it became culpable and blameworthy when the assessee, without reasonable cause, did not furnish a statement/an estimate where he was under an obligation to file it. It is to be noted that the question of payment of advance tax, the whole or a part of it, does not find place in the wording of Section 273. But the marginal note includes 'or failure to pay advance tax' within the sweep of the section. A great emphasis has been laid on this by learned counsel for the Revenue, apart from pointing out that under Section 209A at the relevant time, there is a requirement to pay such advance tax. An old assessee can be made liable to pay penalty under Section 273(1)(b) for and from the assessment year 1979-80, up to September 9, 1986, for failure without reasonable cause to furnish a statement in Form No. 28-A under Section 209A(1)(a). An assessee can be made liable to pay penalty under Section 273(2)(b) for and from the assessment year 1979-80, up to September 9, 1986, for failure without reasonable cause to furnish an estimate under Section 209A(4), or under Section 273(2)(c) for failure to furnish an estimate in Form No. 29 under Section 212(3A).

7. The moot question is whether the express provision relating to non-payment under Section 273 is inadvertent or is impliedly inclusive. It appears that the same is advertent and that too for good and sound reasons. If,after service of notice under Section 210, the assessee neither pays the demand nor furnishes an estimate, he becomes an assessee in default under the pre-1988, Section 218(2). By such non-payment or non-furnishing of estimate, he exposes himself to the provisions about recovery of tax including imposition of penalty under Section 221. In case, after receiving notice under Section 210, the assessee furnishes an estimate showing advance tax payable as nil, thus wiping off the Section 210 demand, he cannot be penalised under Section 221 but exposes himself to action under Section 273(2)(a) if the estimate is found to be knowingly untrue. Conversely, in cases where an assessee is under an obligation to furnish a statement/estimate because of Section 209A(1)(a) or Section 209A(1)(b) or Section 209A(4) or Section 212(3A) and he fails to furnish such statement/estimate, he exposes himself to penalty under Section 273(1)(b) or 273(2)(b) or 273(2)(c), as the case may be. If, on the other hand he furnishes a statement/estimate but does not pay, he becomes an assessee in default under the pre-i988 Section 218(1) and the consequences thereof, including penalty under Section 221, but not under Section 273(1)(b) or 273(2)(b) or 273(2)(c). However, if the statement/estimate is found to be knowingly untrue, penalty under Section 273(1)(a) or 273(2)(a) or 273(2)(aa) may be imposed.

8. However, the question that arises, as contended by the Revenue, is whether use of the expression 'or failure to pay advance tax' in the marginal note makes the position different. Marginal notes appended to a section cannot be referred to for the purpose of construing a statute. As has been observed by the apex court in CIT v. Ahmedbhai Umarbhai and Co. : [1950]18ITR472(SC) , marginal notes in an Indian statute, as in an Act of Parliament, cannot be referred to for the purpose of construing the statute. In Balraj Kunwar v. Jagatpal Singh ILR [1904] All 393 (PC), it was held that marginal notes cannot be referred to for the purpose of construing the statute. As was explained by Lord Macnaghten, the marginal note is not part of an Act of Parliament. The position was reiterated in Board of Muslim Wakfs v. Radha Kishan : [1979]2SCR148 . Marginal notes to the sections cannot control construction of the statute if its language is clear and unambiguous (see Nalinakhya Bysack v. Shyam Sunder Haldar : [1953]4SCR533 and Chandroji Rao v. CIT : [1970]77ITR743(SC) ). But they may throw light on the intention of the Legislature in case of ambiguity (see R.S. Joshi, STO v. Ajit Mills Ltd. : [1978]1SCR338 ), judges should refrain from giving weight to marginal notes and side notes (see Parsons v. B. N. M Laboratories Ltd. [1963] 2 All ER 658 (CA)). The Tribunal has referred to the decision of the apex court in K.P. Varghese v. ITO : [1981]131ITR597(SC) , wherein it was observed that it is undoubtedly true that the marginal note to a section cannot be referred to for the purpose of construing the section, but it can certainly be relied upon as indicating the drift of the section or to show what the section is dealing with. Marginal notes cannot control the interpretation of the words of a section particularly when the language of the section is clear and unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section (see Bushell v. Hammond [1904] 2 KB 563 ). The position was reiterated by the apex court in Shree Sayan Mills Ltd. v. CIT : 1986ECR276(SC) and Indian Aluminium Co. v. Kerala State Electricity Board : [1976]1SCR70 . In the instant case, the Revenue cannot take aid of the marginal note because the language is clear and unambiguous.

9. While dealing with a similar question relating to scope of Section 273(2)(c), it was observed by the Gujarat High Court in CIT v. B.P. Mehta : [1993]199ITR654(Guj) as follows (headnote) :

'The language of Section 273(2)(c) of the Income-tax Act, 1961, is very clear and what is stipulated is that, on the failure of an assessee to furnish an estimate of advance tax payable by him in accordance with the provisions of Sub-section (3A) of Section 212, penalty can be imposed. Liability for penalty under Section 273(2)(c) is incurred by the assessee only when the assessee fails to furnish an estimate of the advance tax payable by him in accordance with the provisions of Section 212(3A). Section 273(2)(c) does not deal with the liability which may arise because of failure of the assessee to pay such amount of advance tax as accords with his estimate of advance tax.'

10. The view expressed in the decision, with which we are in agreement, is equally applicable in the case covered under Section 273(1)(b) of the Act.

11. The question is answered in favour of the assessee and against the Revenue. References are accordingly disposed of.


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