1. An important question of law involving the interpretation of Section 18A(8) of the Indian Income-tax Act is raised before us in this reference application.
2. The assessee is the sole proprietrix of a business in lucifer matches run under the name and style of 'Gem Match Works' at Sivakasi. For the year ended 29th June, 1947, the previous year in respect of the assessment year 1948-49, she submitted her return of income declaring that the income was Rs. 11,143. The Additional Income-tax Officer, Virudhunagar, completed the assessment on 17th March, 1953, and determined the total income of the assessee as Rs. 25,129. On appeal by the assessee to the Appellate Assistant Commissioner, Madurai, this assessment was set aside on 11th July, 1955, The Income-tax Officer was directed by the appellate authority to make a fresh enquiry regarding the real ownership of the match business, whether it belonged to her or to her husband, and to make a further assessment. The Income-tax Officer made a fresh assessment on 7th March, 1958. He held that the business belonged to the assessee and not to her husband and computed the total income as Rs. 47,586 and levied a tax of Rs. 14,749-93. The officer also levied penal interest of Rs. 4,669.06 on the assessee under Section 18A(8) of the Act. This order was challenged by the assessee by preferring an appeal to the Appellate Assistant Commissioner. One of the grounds urged in the appeal by the assessee related to the levy of penal interest. It was contended that the Income-tax Officer failed to exercise the discretion vested in him under Rule 48 of the Income-tax Rules to reduce or waive the penal interest leviable. The assessment proceedings were spread over a number of years from 1953 to 1958, and it was the assessee's contention that she should not be mulcted with penal interest for the period of the pendency of the proceedings as it cannot be said that she was in any way responsible for such pendency. The appellate authority considered that the case was a fit one where relief under Rule 48 could be given to the assessee. He, accordingly, disposed of the appeal giving the following direction:
'The delay in the assessment cannot at all be attributed to the appellant. It is plain that the Income-tax Officer has not applied his mind at all to the question of application of Rule 48. The officer is directed to pass an order determining the interest payable by the appellant in the light of the last proviso to Section 18A(6) read with Rule 48 of the Income-tax Rules.'
3. The revenue preferred an appeal to the Income-tax Appellate Tribunal challenging the validity of the direction of the Appellate Assistant Commissioner to apply the fifth proviso to Section 18A(6) to the instant case. The Tribunal held that the direction of the Appellate Assistant Commissioner was erroneous in law, and, accordingly, allowed the appeal and set aside the direction. On the application of the assessee under Section 66(1) of the Indian Income-tax Act, the Tribunal has referred the following question to this court:
'Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in law in holding that the Appellate Assistant Commissioner erred in directing the Income-tax Officer to determine the interest payable by the assessee under Section 18A having regard to the fifth proviso of Section 18A(6) read with Rule 48 of the Income-tax Rules ?'
4. We shall briefly refer to the relevant portions of Section 18A and Rule 48. Omitting unnecessary words, Section I8A, so far as it is necessary to refer to it in the present context, reads as follows :
'18A. (1) ..... the Income-tax Officer may, on or after the 1st dayof April in any financial year, by order in writing, require an assessee to pay quarterly to the credit of the Central Government on the 15th day of June, 15th day of September, 15th day of December and 15th day of March in that year, respectively, an amount equal to one quarter of the income-tax and super-tax payable on so much of such income as is.included in his total'income of the latest ptevious year in respect of which he his been assessed, if that total income exceeded the maximum amount not chargeable to tax in his case by two thousand five hundred rupees.....
18A. (2) If any assessee who is required to pay tax by an order under Subsection (1) estimates at any time before the last instalment is due that the part of his income to which that sub-section applies for the period which would be the previous year for an assessment for the year next following is less than the income on which he is required to pay tax and accordingly wishes to pay an amount less than the amount which he is so required to pay, he may send to the Income-tax Officer an estimate of the tax payable by him calculated in the manner laid down in Sub-section (1).....and shall pay such amount as accordswith his estimate in equal instalments on such of the dates specified in Subsection (1)1.....
18A. (3) Any person who has not hitherto been assessed shall, before the 15th day of March in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed the maximum amount not chargeable, to tax in his case by two thousand five hundred rupees send to the Income-tax Officer an estimate of the tax payable by him on that part of his income.....calculated in the manner laiddown in Sub-section (1), and shall pay the amount, on such of the dates specified in that sub-section.....by instalments.....
18A. (6) Where in any year an assessee has paid tax under Sub-section (2) or Sub-section (3) on the basis of his own estimate, and the tax so paid is less than eighty per cent, of the tax determined on the basis of the regular assessment.....simple interest at the rate of six per cent. per annum from the 1st dayof January in the financial year in which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty per cent.:
Provided that for any period after the 31st day of March, 1952, interest shall be payable at the rate of four per cent, per annum :
Provided further that where a provisional assessment is made under Section 23B, interest shall be calculated in accordance with the foregoing provision up to the date on which the tax as provisionally assessed is paid, and thereafter interest shall be calculated at the rate aforesaid on the amount by which the tax as so assessed.....falls short of the said eighty per cent.:
Provided also that, where, as a result of an appeal under Section 31 or Section 33 or of a revision under Section 33A or of a reference to the High Court under Section 66, the amount on which interest was payable under this subsection has been reduced the interest shall be reduced accordingly and the excessinterest paid, if any, shall be refunded together with the amount of income-tax that is refundable:
Provided further that, where a business, profession or vocation is newly set up and is assessable on the income, profits and gains of its first previous year in the financial year following that in which it is set up, the interest payable shall be computed from the 1st day of April of the said financial year :
(5th proviso): Provided further that in such cases and under such circumstances as may be prescribed, the Income-tax Officer may reduce or waive the interest payable by the assessee.
18A. (8) Where, on making the regular assessment, the Income-tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of this Section, interest calculated in the manner laid down in Subsection (6) shall be added to the tax as determined on the basis of the regular assessment.
Rule 48.--The Income-tax Officer may reduce or waive the interest payable under Section 18A in the cases and under the circumstances mentioned below, namely:
(1) When the relevant assessment is completed more than one year after the submission of the return, the delay in assessment not being attributable to the assessee.
(2) Where a person is under Section 43 deemed to be an agent of another person and is assessed upon the latter's income.
(3) Where the assessee has income from an unregistered firm to which the provisions of Clause (b) of Sub-section (5) of Section 23 are applied.
(4) Where the 'previous year' is the financial year or any year ending about the close of the financial year and large profits are made after the 15th of March, in the circumstances which could not be foreseen.
(5) Any case in which the Inspecting Assistant Commisioner considers that the circumstances are such that a reduction or waiver of the interest payable under Section 18A(Q) is justified.'
5. The scheme, under Section 18A, of payment of advance tax is fairly clear, The Income-tax Officer may call upon the assessee to pay advance tax quarterly, commencing from 15th day of June of each assessment year, on the basis of the assessment of the latest previous year, relating to the assessee. But the assessee is clothed with the right to offer his estimate of the income for the relevant period and pay advance tax on the basis of that estimate. At that stage, the Income-tax Officer has no right to refuse to accept the estimate of the assessee and insist upon the payment of tax as demanded by him. The assessee, however, takes the risk of being obliged to pay interest, which is popularly known as 'penal interest', where the advance tax paid by him on his own estimate falls below eighty per cent. of the tax ultimately levied as the result of regular assessment. In other words, the assessee has a twenty per cent. margin to make a wrong estimate. Having regard to the fact that proceedings by way of assessment are usually spread over a long number of years, the Income-tax Officer has been given a discretion, under the fifth proviso toSection 18A(6), to reduce or waive interest, so that the assesses may not suffer by the delay on the part of the revenue. An assessee, who fails to pay advance tax, falls within the ambit of Section 18A(8) and becomes liable to pay interest; and the manner of calculation of such interest is the same as that provided for in Section 18A(6). It is quite obvious that Sections 18A(6) and 18A(8) govern two different classes of assessees, assessees who have paid some advance tax and assessees who have not paid any advance tax at all.
6. The short point, that arises for decision is whether the fifth proviso to Section 18A(6) should be read into Section- 18A(8). That the proviso operates to govern only cases falling within the ambit of Sub-section (6) cannot be disputed, and we do not understand learned counsel for the assessee to urge any contrary contention, as prima facie the scope of a proviso is only to modify or enlarge the operational field of the particular Section or sub-section to which it is engrafted. The normal Rule of construction is that a proviso must be considered with relation to the principal matter to which it stands as a proviso (Moulton Lord Justice in Rex v. Dibdin,  Probate 57.). It is, however, pointed out by the learned counsel for the assessee that the language of Sub-section (8) is sufficiently wide to incorporate in it the fifth proviso of Sub-section (6). Reliance is placed on the words 'interest calculated in the manner laid down in Sub-section (6)'. The argument is that the levy of interest under Sub-section (8) is cast in the same mould as that in Sub-section (6) and the jurisdiction and power of the department are identical in regard to both sets of cases in Subsections (6) and (8). We have, therefore, to examine the terms of Sub-section (8) closely to ascertain the true intention of the legislature--Whether it had in view the conferment of the benefit of the fifth proviso of Sub-section (6) to the assessee falling under Sub-section (8). Now, Sub-section (8) makes the assessee liable to pay 'interest, calculated in the manner laid down in Sub-section (6)'. The discretion of the Income-tax Officer to reduce or waive interest payable by an assessee under such circumstances as may be prescribed is not a component of calculation, nor is it a feature of the manner of computation of interest. The quantum of the interest liability must be fixed by the officer before he can apply his mind to the question of reduction or waiver. It would be strange to hold that--idea of reduction or waiver can be entertained as part of the process of determination of interest. We are unable to agree with the contention urged on behalf of the assessee that the manner of calculation of interest as laid down in Sub-section (6) takes in its fold the discretion of the Income-tax Officer to reduce or waive interest in an appropriate case.
7. Mr. K. Srinivasan, learned counsel for the assessee, urged that subsection (6) is really the charging section and it does not therefore matter whether the assessee is governed by Sub-section (6) or by Sub-section (8) in the matter of the levy of penal interest. We are unable to agree. As stated already the two sub-sections do not operate in the same field as they cover assessees of different types. An assessee under Sub-section (6) is one who has paid the tax on his own estimate and who is further found to have made an under-estimate as a result ofthe final assessment. Sub-section (8) deals with an assessee who never made an advance payment at all. There is, therefore, no scope for the argument that Subsection (6) is the charging section in respect of an assessee falling within the ambit of Sub-section (8).
8. Mr. Srinivasan next contended that Rule 48 is general in its application as itVests the discretion in the Income-tax Officer to reduce or waive interest payable under Section 18A without specifying whether the interest levied or whether theinterest leviable is one under Sub-section (6) or one under Sub-section (8), Thereis hardly any substance in this contention. Rule 48 has been framed only togive effect to the fifth proviso under Sub-section (6). The rule can apply only ina case where under the enactment the Income-tax Officer is entitled to grantreduction of interest or to waive the interest payable by the assessee. If, on aproper construction of Sub-section (8), it were to be held that the officer has nodiscretion to reduce or waive interest, the language of Rule 48, however wide andgeneral it may be, cannot confer such a power.
9. Precisely the same question, as the one which we are now considering, was raised before the Bombay High Court in Lata Mangeshkar v. Union of India, : 36ITR527(Bom) .. The assessee in that case, who was a singer by profession, was subjected to levy of penal interest as a result of the application of Section 18A(8). The question raised was whether the Income-tax Officer was bound in law to apply the fifth proviso of Sub-section (6) to a case directly falling within Sub-section (8). The Bombay High Court answered the question in the negative. At page 534, the learned Chief Justice observes thus :
'If the intention of the legislature was to incorporate all the provisions in those provisos under Sub-section (8), it was not necessary for it to refer in express and explicit terms to the manner of calculating interest laid down in Sub-section (6) in enacting Sub-section (8). It is clear, therefore, that in subsection (8) the legislature thought it necessary only to bring that part of subsection (6) within the ambit of Sub-section (8) which it thought was necessary to work out the provisions of Sub-section (8) and this provision only refers, as we have just stated, to the manner of 'calculating interest' and nothing else. With these express words in Sub-section (8) in reference to Sub-section (6), it is extremely difficult to see how the last proviso of Sub-section (6) is to be read as applicable also to cases falling under Sub-section (8).'
10. Dealing with the contention based upon the language of Rule 48, the learned Chief Justice observes thus at page 536 :
'Reference to Section 18A in that rule cannot be read as if a rule was being laid down as applicable to all the provisions of Section 18A. It must be read in the context of the language of Sub-section (6) and particularly the fifth proviso to that sub-section. It is true that the rules are statutory rules and made by the Central Board of Revenue. But we are not prepared to subscribe to the principle that the rules can in any manner control or direct the interpretation to be placed on the plain language of Sub-section (8).'
11. We respectfully agree with these observations of the learned Chief Justice.
12. Mr. Ranganathan, learned counsel for the department, referred us to an unreported decision of this court in W. P. No, 795 of 1956. There is no discussion of the question in that decision. The learned judges, Rajagopalan and Rajagopala Ayyangar JJ., dismissed the writ petition in the following words:
'There does not appear to be any provision in the Income-tax Act for reduction or waiver of interest where the liability arises under Sub-clause (8) of Section 18A.'We have reached the same conclusion as the learned judges in that case after having considered the question fully.
13. The question is answered against the assessee, who will pay the costs of the department. Counsel's fee Rs. 250.