Skip to content


K.T.M.S. Umma Salma Vs. Commissioner of Income-tax, Central Madras - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Judge
Reported in[1983]144ITR890(Mad)
ActsIncome Tax Act, 1961 - Sections 2(43), 116, 139, 143, 148, 156, 271, 271(1), 271(4A) and 254(2)
AppellantK.T.M.S. Umma Salma
RespondentCommissioner of Income-tax, Central Madras
Appellant AdvocateM. Uttam Reddi, Adv.
Respondent AdvocateJ. Jayaraman, Adv.
Cases ReferredJ. M. Shah v. J. M. Bhatia
Excerpt:
direct taxation - mistake of law - sections 2 (43), 116, 139, 143, 148, 156, 271, 271 (1) 271 (4a) and 254 (2) of income tax act, 1961 - result of introduction of amended provision with retrospective operation is that amendment made in 1974 must by legal fiction be deemed to have been included in principal act from 01.04.1962 - at time when tribunal passed order on 26.10.1973 section as amended must be deemed to have been inserted in act - effect of retrospective operation of amendment to section 271 (1) (a) is that it shall be deemed to have been included in act from 01.04.1962 - under such circumstances order of tribunal inconsistent with provisions of statute apparent from record - tribunal has got jurisdiction to rectify such mistake under section 254 (2). - - not being satisfied.....pasmanabhan, j.1. the assessee in this case mrs. k. t. m. s. umma salma, madras, purchased a land on september 28, 1966, for a sum of rs. 45,000. she should have filed the return of income for the assessment year 1967-68, on or before june 30, 1967. on august 7, 1968, she returned an income of rs. 37,397. the said amount represented the sum invested by her in the purchase of land as aforesaid. on the basis of the return filed by the assessee the assessment was completed on october 17, 1968. however, the ito initiated penalty proceedings against the assessee under s. 271(1)(a) of the i. t. act, 1961, (hereinafter called the act). on august 26, 1970, the assessee wrote to the ito stating that she was eligible for sympathetic consideration under s. 271(4a) of the act. not being satisfied.....
Judgment:

Pasmanabhan, J.

1. The assessee in this case Mrs. K. T. M. S. Umma Salma, Madras, purchased a land on September 28, 1966, for a sum of Rs. 45,000. She should have filed the return of income for the assessment year 1967-68, on or before June 30, 1967. On August 7, 1968, she returned an income of Rs. 37,397. The said amount represented the sum invested by her in the purchase of land as aforesaid. On the basis of the return filed by the assessee the assessment was completed on October 17, 1968. However, the ITo initiated penalty proceedings against the assessee under s. 271(1)(a) of the I. T. Act, 1961, (hereinafter called the ACt). On August 26, 1970, the assessee wrote to the ITo stating that she was eligible for sympathetic consideration under s. 271(4A) of the Act. Not being satisfied with the explanation of the assessee the ITO levied a penalty of rS. 2,577 against the assessee under s. 271(1)(a) of the ACt. The assessee preferred I. T. A. No. 328/70-71, before the AAC, who confirmed the levy of penalty and dismissed the appeal. The assessee p[referred as second appeal before the Income-tax Appellate Tribunal in I. T. A. No. 1067/71-72. Though at the time of hearing of the appeal an adjournment was asked for by the department representative on the ground that a bill incorporating ask amendment to s. 271(1)(a)(i) was pending consideration before Parliament. the same was not granted by the Tribunal, Two contentions were raised before the Tribunal on behalf of the assessee. The first contention was that there was reasonable cause for the belated filing of the return. The Tribunal did not accepts this contention and found that there was no reasonable cause for the delay in filing the return on the part of the assessee. The next contention was that the entire tax had bene paid on November 20, 1968, and consequently no tax was due on october 7, 1970, in the circumstance, s it was contended on behalf of the assessee that no penalty could be levied. In. his context, reliance was place on the decision of the Supreme Court in CIT v Vegetable Products Ltd. : [1973]88ITR192(SC) . On e basis of the ratio of the decision of the Supreme Court, the Tribunal held that no penalty was livable as no tax was outstanding on the date of the imposition of penalty and that, therefore, the levy of penalty could not be sustained. Thereafter, section 271(1)(a) of the act was amended by s. 13 of the Direct Taxes (Amendment) Act, 1974. The amendment was made retrospectively with effect from April 1, 1962. Thereupon, the ITo filed M. P. No. 15/76-77 before the Tribunal under s. 254 of the Act. it was urged on behalf of the REvenue that the view of the retrospective amendment of s. 271(1)(a)(i) of the Act with effect from April, 1, 1962, there was a mistake apparent from the record in the order passed by the Tribunal on October 26, 1673, and that consequently the same should be rectified. On the other hand, it was contended on behalf of the assessee that there was no rectifiable mistake in the earlier order of the Tribunal and that in any event, even assuming that there was such a mistake, the Tribunal had no jurisdiction to rectify the mistake. It was also urged on behalf of the assessee that the Tribunal could not rectify an earlier order merely because the statue had been subsequently amended with retrospective effect. The Tribunal, following the decision of the Supreme Court in M. K. Venkatachalam, ITO v. Bombay Dyeing and . : [1958]34ITR143(SC) and S. A. L. Narayan Raw v. Ishawarlala Bhagwandas : [1965]57ITR149(SC) , rejected the contentions of the assessee and revised its earlier order dated October 26, 1973. The Tribunal held that in view of the amendment of s. 271(1)(a)(i) with retrospective effect, the earlier order was vitiated by a mistake apparent from the record and that a penalty was livable, even though no tax was outstanding on the date of the imposition of penalty. Accordingly, the original appeal filed by the assessee before the Tribunal was dismissed.

2. It is in these circumstances that the Tribunal has referred the following questions of law for adjudication by this court under s. 256(1) of the Act :

'1. Whether, on the facts and in the circumstances of the case, there was a mistake apparent on the record in the order of the Tribunal dated October 26, 1973, by reason of the retrospective amendment to section 271(1)(a) with effect from April 1, 1961

2. If the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, the Tribunal is prevented from rectifying the said mistakes under section 254(2) of the Income-tax Act, 1961, by reasons of its being an appellate authority

3. Whether, on the facts and in the circumstances of the case, levy of penalty for belated filing of the return of income without reasonable cause by the assessee for the assessment year 1967-68, is not valid, because the entire tax assessed had been paid by here before such levy of penalty

3. At the outset it may be mentioned that in the order dated October 26, 1973, it has been found as a fact that there was no reasonable cause for the belated filing of the return. This finding has become conclusive and it is in this background that the questions of law arising for consideration in this reference will have to be answered.

4. Mr. Uttam Reddi, the learned counsel for the assessee, raised the following contentions (1) Under s. 254(2) of the Act, the Tribunal had no jurisdiction to rectify the order dated October 26, 1973. The power that is conferred on the Tribunal under the said section is only to rectify a mistake that is apparent from the record. The fact that the statutory provision on the basis of the which there earlier order was passed has bene subsequently amended, though with retrospective effect, cannot, clothe the Tribunal with jurisdiction to revise its earlier order as if its was vitiated by a mistake apparent from the record. Further, the Tribunal cannot be considered to be an authority under the Act. Section 116 of the Act specifies the authorities under the Act and the Tribunal is not one of the authorities mentioned in the said section. (2) The amended section has not in any manner altered the provision of law as it stood prior toe the amendment. In CIT v. Vegetable Products ltd. : [1973]88ITR192(SC) , the Supreme Court has held that unless some tax was due and outstanding on the date of the imposition of penalty, no penalty could be levied again the assessee even though the assessee had incurred liability under the provision of s. 271(1)(a)(i) of the ACt. In the said decision, the Supreme Court had to consider the impact of the words 'the amount of tax, if any, payable by him' and the words 'the tax'. The amended provision according to the learned counsel has retained the words 'tax, if any, payable'. The addition of the word 'assessed' to the words 'the tax' and making it as 'the assessed tax' does not alter the position of law. In the circumstances, the decisions of the Supreme Court above, referred to is attracted and if no tax is payable by the assessee on the date of the imposition of penalty, the penalty provisions o f s. 271(1)(a)(i) of the Act could not be attracted. (3) In any view of the matter, the question whether there is a mistake apparent from the record will apply only to a case where the mistake is so palpable or glaring on the face of th record and cannot apply to a case where the mistake can only be resolved or discovered by debate or a lengthy argument. In the instant case the construction that has to be placed on the amendment provision is not so clear and is highly debatable and consequently, it cannot be said that the has bene any mistake apparent from record in the earlier order of the Tribunal.

5. On the the hand, Mrs, Nalini Chidamabaram, the learned junior standing counsel for the Revenue, contended that inasmuch as the Tribunal has found on the merits of the case that there was no reasonable cause for the assessee for the delay in filing the returns, she at once because liable for the penalty under s. 271(1)(a)(i) of the ACt. The words 'in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent, of the assessed tax for every month' only quantify the amount of penalty. There is no ambiguity at all in the section as amended. What the section contemplates is, according to the learned junior standing counsel,, that the assessee shall pay by way of of penalty a sum equal to 2 per cent, of the assessed tax and this sum if payable by the assessee in addition to the amount of the tax, if nay, payable by him. the words, 'if any :' have been added only as a precautionary measure so that if any tax is due and payable by the assessee on the date of the imposition of the penalty, the assessee may not avoid paying such tax. In the submission of Mrs. Nalini Chidamabaram the section cannot be interpreted in such a way that, if no tax is payable on the date of the imposition of penalty, no penalty could at all be levied. There is no substance in the contention of Mr. Uttam Reddi that under s. 254 of the Act, the Tribunal has no jurisdiction to rectify a mistake apparent from the record. Section 254(1) states : 'the Appellate Tribunal may, after gibing both the parties to the appeal an opportunity of being heard, pass such order thereon as it thinks fit. ' Section 254(2) states : 'The Appellate Tribunal may, at any time within four year from the date of the order, with a view to rectify in any mistake apparent from the record, amend any order passed by it under sub-section (1), ad shall make such amendment if the mistake is brought to its notice by the assessee or the Income-tax Officer. ' We are not concerned with the provisos to s. 254(2) of the act as also s. 254(3) of the act. Section 254(4) of the aCt states : 'Save as provided in section 256, orders passed by the Appellate Tribunal on appeal shall be final'. Section 254(2) of the act confers inherent jurisdiction on the Tribunal to rectify a mistake committed by it. It also enable both the assessee and the ITO to invoke the jurisdiction of the Tribunal under s. 254(2) of the Act to rectify any such mistake. No doubt, s. 116 of the act enumerates the I. T. authorities commencing from the CBDT, constituted under the Central Boards of Revenue Act, 1963, down to Inspectors of Income-tax, The Income-0tax Appellate Tribunal is not a an income-tax authorities as specified in s. 116 of the aCt. SEction 154 of the act confers the power of rectification of any mistake, apparent from the record, in any order on the ITo, the AAc and the Commissioner. However, the fact that the Income-tax Appellate Tribunal is not mentioned as an I. T. authorities under s. 116 of the Act does not an cannot take away the jurisdiction specifically conferred on the Tribunal under s. 254(2) of the act. The golden rule for the interpretation of a statue is to consider the plain meaning of the words, used. It is not the function of the court o add to or amend the words of a statue when the language is clear. If is the duty of the court to give effect to is. It is well settled that the principal import of a provision which is explicit cannot be controlled by reference to any other provision. We therefore, reject the contention of Mr. Uttam Reddy that since the Tribunal is not an I. T. authorities as enumerated in s. 116 of the Act it has no power to rectify any mistake apparent from the record under the provision of s. 254(2) of the Act.

6. Before we deal with the other contentions urged on behalf of the assessee by her learned counsel, it is necessity to extract s. 271(1)(a)(i) as it stood prior to its amendment in 1974, and as it stood amended by s,. 13 off the Direct Taxes (Amendment) Act, 1974.

7. Section 271(1)(a)(i) of the Act, as it stood prior to its amendment, reads as follows :

'271. Failure to finish returns, comply with notices, concealment of income, etc.-(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the court of any proceedings under this Act, is satisfied that any person-

(a) has without reasonable cause failed to finish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in e manner required by sub-section (1) of section 139 or by such notice, as the case may be, or....

he may direct that such persons shall pay by way of penalty,-

(i) in the cases referred to in cause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent, of the assessed tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the assessed tax.

Explanation-In this clause,'assessed tax' means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C.'

'Amendment of section 271 In section 271 of the Income-tax Act, for clause (i) of sub-section (1), the following clause shall be substitute and shall be deemed always to have bene substituted, viz, (i) in the cases refereed ito in clause (a)...'

8. It is, therefore, clear, and it was not disputed by the learned counsel for the assessee, that s. 271(1)(a)(i) has retrospective effect from April 1, 1962. But the argument of Mr. Uttam Reddi is that the fact that the statutory provisos, on the basis of which the earlier order was passed clothes the Tribunal with jurisdiction to revise its earlier order, as if its was vitiated by a mistake apparent from the record. The order of the Tribunal dated October 26, 1973, was perfectly valid under the law as it stood then and that consequently the same could not be rectified. further, the order has become final and the retrospective operation cannot affect an order which has became final. We are unable to agree with the argument of Mr. Uttam Reddi. The result of the introduction of the amended provision with retrospective, operation is that the amendment made in 1974 must, by legal fiction, be deemed to have bene included in the principal Act as form April 1, 1962. It necessarily follows that at e time when the Tribunal passed the order on October 26, 1973, the section as amendment in 1974, must be deemed to have bene inserted in the ACt. To quote Lord Asquith of Bishopstone in EAst End Dwellings Co. Ltd. v. finsbury Borough Council [1952] Ac 109 (HL), 'if you are bidden to treat an imaginary stated of affairs as real, you must surely, unless probibited from doing so, also imagine as real the consequences and incidents which, if the putative stated of affairs has in fact existed, must inevitably have followed fro m or accompanied it. One of those in this case is emancipation from the 1939 level of rents. The statue says that you must imagine a certain stated of affairs it does not a that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs'. In CIT v. S. Teja Singh : [1959]35ITR408(SC) , the Supreme Court observed that 'It is a rule of interpretation will settled that in constructing the scope of a legal fiction it would be prop[er and even necessary to assume all those facts on which on which alone the fiction can operate. ' thus, there can be no doubt that the effect of the retrospective operation of the amendment to s. 271(1)(a)(i) of the Act is that is shall be deemed to have bene included in the Act as from april, 1, 1962. if that be the true positions then the order passed by the Tribunal on October 26, 1973, is plainly and obviously inconsistent with the provision of the statute and that must inevitably be treated as a mistake of law apparent from the record. If it is so the Tribunal has got every jurisdiction to rectify such a mistake under s. 254(2) of the Act. further, the order passed by the Tribunal on October 26, 1973, cannot be said to have become final, in the sense that s. 254(2) provides that at any time within four years from the dated of the order, the Tribunal may amend any order passed by it with a view to rectify any mistake apparent from e record, if the mistake is brought to its notice either by the assessee or by the ITO. this conclusion of our is fortified by the decision in M. K. Venkatachalam,. ITO v. Bombay Dyeing and Mfg. Co. Ltd. : [1958]34ITR143(SC) . In that case, the ITo by this order dated October 9, 1952, assessed the respondent for the assessment year 1952-53, and gave him credit for Rs. 50,603-15-0 as representing inter on tax paid in advance under s. 18A(5) of the India I. T. Act, 1922. ON May 24, 1953, the Indian I. T. (Amendment) Act, 195 3, came into force adding a proviso to s. 18A(5) of th aCt to the effect that the assessee was entitled to interest not on e whole of the advance tax paiad by this but only on the difference between the payment made and the amount assessed. The Amendment Act provide that it shall be deemed to have come into fore on April 1, 1952, The ITO, acting under s, 35 of the Act, rectified the assessment order holding that the assessee was entitled to a credit of only Rs. 21,157-6 - 0 by way of interest on tax paid in advance as a result of the retrospective operation of th amendment in s. 18A(5) and issued a notice of demand against that assessee for the balance of Rs. 29,446-9-0. The assessee filed a petition in the High Court of Bombay under art,. 226 of the Constitution praying for a writ prohibiting the authorities from enforcing the rectified order and notice of demand. The High Court issued the writ holding that s. 35 was not applicable to the case as the mistake mentioned in s. 35 had to be apparent on the face4e of the order and the question could only be judged in e light of the as as it stood on the day when the order was passed. the REvenue took the matter in appeal to the Supreme Court. the question that was canvassed before the Supreme Court Court was 'Whether, an order, which was proper and valid when it was made, can be said to disclose, a mistake apparent from the record if the said order would be erroneous in view of a subsequent amendment made by the Amendment Act when the Amendment Act is intended to operate retrospectively ' In dealing with this question the Supreme Court observed as follows (p 146 of 34 ITR) :

'In deciding this question, m it would be necessary to determine the true legal effect of the retrospective operation of the Amendment act. SEction 1, sub-section (2), of th Amendment Act expressly provides that subject to the special provision made in the said Act is shall be deemed to have come into forced on the first day of April, 1952. The result of this provisions is that th amendment made in the Act by section 13 of the Amendment Act must, by legal fiction, be deemed to have been included in the principal Act as form the first of April, 1952, and this inevitably mean that, at the time when the Income-0tax Officer passed his original order on October 9, 1952, allowing to the respondent credit for Rs. 50,603-15-0, the proviso added by section 13 of the Amendment Act must be deemed to have been inserted in the ACt... Thus, there can be no doubt that the effect of the retrospective operation of the Amendment Act is that the provisos inserted by the said section in section 18A(5) of the Act would, for all legal purposes, have to be deemed to have bene included in the Act as form April, 1, 1952.

But it is urged for the respondent that the retrospective operation of the relevant provision is not intended to affect completed assessment. It is conceded that, if any assessment proceedings in respect o the assessee income for a period subsequently to the 1st of April, 1952, were pending at the time when the Amendment Act was passed, the proviso inserted by section 13 would govern the decision in such assessment proceedings, but where an assessment proceedings has been completed and an assessment order has bene passed by the Income-tax Officer, against the assessee, such a completed assessment would not be affected and cannot be reopened under section 35 by virtue of the retrospective operation of the Amendment Act.... The argument for the respond, t is that the assessee has obtained a right under the order passed by the Income-tax officer to claim credit for the specified amount under section 18A(5) and the said right cannot be taken away by the retrospective operation of section 13 of the Amendment Act..... In our opinion, this argument does not really help the respondents case because the order passed by the Income-tax Officer under section 18A(5) cannot be said to final in the literal sense of the word. This order was and contained to be liable to be modified under section 35 of the act.... At the time when the Income-tax Officer applied his mind to the question or rectifying the alleged mistake, there can be doubt that he had to seas the principal Act as contained the inserted provision as form April 1, 195 2. if that be the true position then the order which he made giving credit to the respondent for Rs. 50,603 is plainly and obviously inconsistent with a specific and clear provision of the stature and that must inevitably be treated as a mistake of law apparent from the record. If a mistake of fact apparent from the record of the assessment order can be rectified under s,. 35, we see not reason why a mistake of law which is glaring and obvious cannot be similarly rectified.'

9. The next question to be considered is whether the amendment provision has in any manner altered the procession as it stood prior to the amendment in 1974 and if so to what extent. We have already extracted above s. 271(1)(a)(i) of the aCt as it stood prior to its amendment in 1974. the Supreme Court had occasion to interpret s. 271(1)(a)(i) of the Act, in CIT v. Vegetable Products Ltd. : [1973]88ITR192(SC) . as it stood prior to its amendment in 1974. In that case there was a provisional assessment made by the ITO under s, 23B of the Indian I. T. Act,. on February 2, 1961. Immediately, thereafter, the assessee deposited Rs. 92,294.55. the ITO completed the assessment on 31st October, 1962, and determined the tax due for the assessee for the assessment year at Rs. 1,25,512. He also levied a penalty of Rs. 12,734 for belated filing of the returne. In levying the penalty the ITO did not take into consideration the emote demanded under s. 156 of the Act but the amount assessed under s. 143 of the Act. The assessee filed an appeal before the AAc against the quantum of penalty levied by the same was dismissed. On further appeal, the Tribunal came to the conclusion that the penalty under s. 271(1)(a)(i) of the Act has to be levied on the tax assessed minus the amount paid under the provisional assessment. On the basis off that finding the Tribunal determined the penalty payable by the assessed at Rs. 2,737. The order of the Tribunal having been confided by the High court, the Revenue took up the matter before the Supreme Court. On behalf of the Revenue it was contended before the Supreme Court that on a proper construction of s. 271(1)(a)(i) of the Act the penalty had to be determined one basis of e tax assessed under s. 143 of the ACt. On the other hand, it was contended on behalf of assessee that the penalty could only be imposed on e amount payable under s. 156 of the Act. In interpreting the section the Supreme Court laid emphasis on the words 'the amount of tax, if any, payable by him : and the words ' the tax' that occurred in s. 271(1)(a)(i) of the ACt. The Supreme Court then observed as follows (p. 196 of 88 ITR) :

'We must fist determined what is the maintain of the expression 'the amount of the tax, if any, payable by him' in section 271(1)(a)(i). Does it mean the amount of tax assessed under s. 143 or the amount of tax payable under section 156 the word 'assessed' is a term often used in taxation law. It is used in several provision in the ACt. Quantification of the tax payable is always refereed to in the act as a tax 'assessed' A tax payable is not the same thing as tax assessed, The tax payable is that amount for which a demand notice is issued under section 156. In determining the tax payable, l the tax already paid has to be deducted. Hence, there can be no doubt that the expression 'the amount of the tax, if any payable by him' referred to in e firms part of section 271(1)(a)(i) refers to the tax payable under a demand notice. We next come to the question what is the maintain to be attached to the words 'the tax' found in e latter part of that provision, It may be noted that the expression used is not 'tax'; but 'the tax. The definite articles 'the' must have reference to something said earlier. It can only refer to the tax, if any, payable by the assessee mentioned in the first part of section 271(1)(a)(i) of the ACt. It is true the expression 'tax' is defined in section 2(43) thus :

''tax' in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequently assessment year means income-tax chargeable under the provision of this Act, and in relation to any other assessment year income-tax super-tax chargeable under the provision of this act prior to the aforesaid date.

But the difficulty in is case is, as mentioned earlier, the expression used is not 'tax' but 'the tax. That expression can be reasonably understood as referring to the expression earlier used in the provision, namely, the amount of the tax, if any, payable, by e assessee.'

10. Based on this interpretation, of the unamended s. 271(1)(a)(i) of th Act, by the Supreme Court, Mr. Uttam Reddi contended that if no tax is payable by the assessee on the date of the imposition of the penalty, the penalty provision of s. 271(1)(a)(i) of the Act is not attracted and no penalty could be levied. We are unable to appreciate this argument of Mr. Uttam REddi for two reasons, Firstly, s. 271(1)(a)(i) of th Act has bene amended and the interpretation given by e Supreme Court on the unamended section cannot be ap; lied to the amended section. Secondly, the Supreme Court in the above case did not lay down the proposition that if no tax is payable by the assessee on e date of the imposition of the penalty, no penalty could at all be levied. What the Supreme Court held tin that case is (head note of 88 ITR 192) : 'in calculating the penalty livable under section 271(1)(a)(i) of the Income-tax Act, 1961, for failure of file the return of income.... within e time without reasonable cause, the was paid by the assessee under provisional assessment under section 23(2) of e Indian Income-tax Act, has be deducted from the amount of tax determined under section 23(2) of that Act, in order to determined under section 23(2) of that Act, in order to determined the amount of tax on which the computation of the penalty was to be based.'

11. Mr. Uttam Reddi then contend that the amendment to s. 271(1)(a)(i) of the Act has not in any manner altered the situation as it stood prior to the amendment. Accordingly to learned counsel the words used in the unamendment section, vix., 'the amount of tax if any payable 'have been retained in the amended section as well and the addition of the word 'assessed' before the words 'tax' cannot in any manner change the position,. We are unable to agree. In the unamended s. 271(1)(a)(i) of the ACt the words ' the tax' were preceded by the words 'the amount of tax, if any, payable' and in view of th fact that before the word 'tax' the definite articular' the' appeared the Supreme Court came to the conclusion that e dainty article 'the' must refer to an expression earlier used in the prison and in that view understood the words 'the tax' as referring to e expression found in e earlier p; art of the section, viz., 'the amount of tax, if any, payable by the assessee'. But the amendment section uses the words 'the assessed tax 'instead of 'the tax' used in the unamended section. this amendment, in our view, has brought about a fundamental change in e very provision itself. A reading of s. 271(1)(a)(i) of the aCt as amended makes it clear that the assessee has to pay by way of penalty a sum equal to two per cent. of the assessed tax every month during which the default continued. This penalty has to be paid in addition to the amount of the tax, if any, payable by him. Now e question is what the term ' the assessed tax' means tax' and 'the payable'. While e ITO under s. 143 of the act, the tax payable is that amount for which a notice is issued under s, 156 of e act. Hence, the terms 'the assessed tax' used in. amended section would mean only the amount of tax as determined by e ITo under s. 143 of the act. However, this will be subject to the explanation given to the section which is not attracted to the facts of this case. In to other words, the tax pay d after assessment of the tax by the ITO under s. 153 of the act cannot be deducted from ' the assessed tax' for computation of the penalty. The penalty is levied for the belated submission of th return without any reasonable cause and it has no relevance tot he amount of tax payable by an assessee. Once the assessee has failed to file the return in time without any reasonable cause, the default has occurred and the assessee has incurred he liability to penalty for the said defult. In the connection, e decision of this court in CIt v. Smt. Vijayuanthimala [1977] 1089 ITR 882, referred to by Mr. Nalini Chidamabaram, the junior standing counsel for the Revenue may be cited with advantage where it has been held as follow (head note) :

'Once an assessed has failed to pay the amount of advance tax on the due date, default has occurred and the assessee has incurred the liability to penalty for the said default. The fact that the assessee has subsequently p[aid the amount whether, it was before the Income-tax officer issued the notified or after the issued the notice, cannot wipe out of efface the default which has already occurred and the consequence liability which e assessee had incurred. Hence, for the imposition of the penalty, it is not necessary that e tax must be in arrears on th date when the penalty was levied.

12. We, therefor, e reject the contention of Mr. Uttam, m Reddi that unless some tax is due outstanding on the date of the imposition of penalty, no penalty could be levied against the assessee even though the assessee had incurred liability under the provision of s, 271(1)(a)(i) of the Act. We further hold that the amendment brought about by the Parliament to s. 271(1)(a)(i) of the act has changed the provision as it stood pr9is to the amendment in 1974.

13. The last of the argument of Mr. Uttam, m REddi to be adverted to is that the is no error apparent from the record inasmuch as the error that the was sought to be rectified is not so glaring or palpable, but can only be resolved by a debate and lengthy argument and that the construction that has to be placed on e amended provision is also not so clear and is highly debatable. when the error that is sought to be rectified and the construction to the put on the amended s. 271(1)(a)(i) of the Act could be resolved by a debate and lengthy argument, then there cannot be any error apparent from the record. In support of his argument, the learned counsel relied on e decision of the Bombay High Court in J. M. Shah v. J. M. Bhatia, AAC : [1974]94ITR519(Bom) , where it has bene held that 'It was a debatable point of law as to whether the amending provision, applied to a completed assessment against which no further proceedings were pending at the date of enactment of the amending provision. ' Whether the amending provision applied to a completed assessment or not, cannot be a datable point of law because that is settled as early as in 1958 by the decision of the Supreme Court in M. K. Venkatachalam ITO, v. Bombay Dying and Mfg. Co. Ltd. [1958] 34 ITR 14. In view of s. 13 of the Direct Taxes (Amendment) Act, 1974, the amended s. 271(1)(a)(i) of the act must be deemed to have bene in e statue book from its very commencement and that consequently the order passed by the Tribunal on October 26, 1973, was inconsistent with the amended s. 271(1)(a)(i) of the act. Hence there was an error in e order passed by the Tribunal and that error was glaring and palpable and no extraneous matter was required to show that the order was manifestly wrong and no court would permit such an error to remain on record. The construction to be put on the amended s. 271(1)(a)(i) of th Act also does not involve any lengthy process of argument and decision. there is no ambiguity in the amended section. to us, the amended provisions is not capable of more than one interpretion at all. It is clear from the amended section that the penalty does not taken the place of the tax, if any, payable, but it is in addition to that amount. hence, we reject the last of the contentions of Mr. Uttam Reddi also.

14. In view of the conclusion reached by us, one scope of ss, 254(2) and 271(1)(a)(i) of the Act, we answer the first qestion in the affirmative and in favour of the Revenue and against the assessee and the second and third question in the negative and in favour of the Revenue and against t the assessee. The REvenue will be entitled to its costs. Counsel's fee Rs. 500.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //