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S. Chenniappa Mudaliar Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 428 and 429 of 1970
Judge
Reported in[1974]95ITR618(Mad)
ActsTaxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 - Sections 3(1)
AppellantS. Chenniappa Mudaliar
RespondentCommissioner of Income-tax
Appellant AdvocateK. Srinivasan and ;K.C. Rajappa, Advs.
Respondent AdvocateV. Balasubrahmanyan and ;J. Jayaraman, Advs.
Cases ReferredCape Brandy Syndicate v. Commissioners of Inland Revenue
Excerpt:
.....1954 - writ petition challenging validity of orders levying penalty - section 3 (1) (c) validates penalty orders not withstanding that amount of tax for non-payment of which penalty has been levied has been reduced in final order - petitioner had not challenged validity of penalty orders before - he allowed same to become final - petitioner not entitled to rely on subsequent events leading reduction of tax for questioning validity of penalty orders - held, statute specifically validates penalty levied earlier - not open to petitioner to invoke equitable considerations and question validity of orders of penalty. - - but it is well established that the court is to be guided only by the expressed intention of a statute and the meaning and intention of a statute must be collected from..........while considering the scope of sections 29 and 45 of the indian income-tax act, 1922, that when a demand levied by the income-tax officer as a result of an assessment is varied by an appellate or revisional authority, the original order of the income-tax officer merges into the order of such authority and consequently in all cases where the appellate or revisional order varies the assessment, the original order goes and all steps already taken for the recovery of the demand became null and void and that, in such cases, it is the duty of the income-tax officer to issue fresh notice of demand in the prescribed form and serve it upon the assessee. the act, therefore, provides under section 3 that in cases where the appellate or revisional authority varies the assessment order, it shall not.....
Judgment:

Ramanujam, J.

1. The petitioner herein submitted a return of hisincome for the assessment year 1956-57. The Income-tax Officer determined his total income at Rs. 4,13,645 and the tax thereon at Rs. 75,661. The petitioner filed an appeal to the Appellate Assistant Commissionercontending that two sums of Rs, 72,515 and Rs. 3,14,100 arising on saleof shares were not taxable under Section 10(5A) of the Indian Income-taxAct, 1922. He also contended that he had the option of getting theamount of Rs. 72,515 taxed at the average rate applicable to the totalincome for three years preceding the assessment year 1956-57. TheAppellate Assistant Commissioner, however, rejected those contentions andconfirmed the assessment order. There was a further appeal to theTribunal, and the Tribunal held that the addition of the said two sumsmade by the Income-tax Officer was invalid and, therefore, deleted thesame from assessment. The said decision of the Tribunal was alsoconfirmed by this court on September 1, 1966, in T.C. No. 244 of 1965 Commissioner of Income-tax v. S. Chenniappa Mudaliar : [1967]64ITR213(Mad) . Thus, the two sums referred to above came to be deleted from the totalincome of the assessee and the total income was actually determined atRs. 27,030.

2. However, by then, demands had been issued to the petitioner for the payment of the tax of Rs. 75,661 as originally determined and the petitioner has paid a total sum of Rs. 75,580.04 in various instalments as set out below:

DateAmount paid

Rs.

20-9-19575,000.0018-11-195710,000.0016-12-19575,000.0016-1-195810,000.0020-1-19585,000.0028-1-19585,000.003-2-19585,000.0024-2-19583,000.0026-3-19583,000.0029-3-19582,000.004-9-19588,689.0431-3-195916,000.00

3. The Income-tax Officer had also levied a penalty of Rs. 11,000 whichhad been paid in instalments as detailed below :

Rs.29-3-19583,000.007-10-19583,000.0026-12-19585,000.00

4. After the original assessment order was modified by the Income-taxOfficer in pursuance of the judgment of this court in T.C. No. 244 of 1965,the petitioner filed a revision petition to the respondent herein seeking thecancellation of the order of penalty on the ground that no penalty wasexigible in view of the tax actually payable by him being only Rs. .4,740.The respondent by his order dated October 16, 1969, rejected the saidrevision petition holding that in view of the provisions of the Taxation Laws(Continuation and Validation of Recovery Proceedings) Act, 1964 (Act 11of 1964), the penalty of Rs. 4,740 was validly imposed and the balance ofRs. 6,260 had already been refunded to the petitioner. The present writpetitions have been filed (1) to quash the order of the respondent, (2) todirect the refund of a sum of Rs. 4,740 levied and collected as penalty.

5. The respondent, however, contends that the retention of the penalty of Rs. 4,740 which is equal to the tax ultimately determined as payable by the petitioner is in accordance with the proviso to Section 3(1)(c) of the said Central Act 11 of 1964. The question, therefore, involves the scope and interpretation of the said proviso.

6. Section 3 of Central Act 11 of 1964, so far as it is relevant for the present case, is as follows :

3. Continuation and validation of certain proceedings.--(1) Where any notice of demand in respect of any Government dues is served upon an assessee by a taxing authority under any scheduled Act, and any appeal or other proceeding is filed or taken in respect of such Government dues, then,--. .....

(c) no proceedings in relation to such Government dues (including the imposition of penalty or charging of interest) shall be invalid by reason only that no fresh notice of demand was served upon the assessee after the disposal of such appeal or proceeding or that such Government dues have been enhanced or reduced in such appeal or proceeding :

Provided that if as a result of any final order such Government dues (other than annuity deposit) have been reduced and the penalty imposed on the assessee for default in payment thereof exceeds the amount so reduced, the excess shall not be recovered and if it has already been recovered, it shall be refunded to the assessee on an application made by him to the taxing authority within such time and in such manner as may be prescribed by rules made under this Act:......

Provided further that where any Government dues are reduced in such appeal or proceeding and the assessee is entitled to any refund thereof, such refund shall be made in accordance with the provisions of that Act. .....

(3) The provisions of this section shall have effect notwithstanding any judgment, decree or order of any court, tribunal or other authority.'

7. As seen from the statement of objects and reasons, the above Act is intended to remove difficulties in the collection of income-tax and other direct taxes referred to in the Schedule to that Act arising out of the decision of the Supreme Court in Income-tax Officer v. Seghu Buchiah Setty, : [1964]52ITR538(SC) wherein it has been held while considering the scope of sections 29 and 45 of the Indian Income-tax Act, 1922, that when a demand levied by the Income-tax Officer as a result of an assessment is varied by an appellate or revisional authority, the original order of the Income-tax Officer merges into the order of such authority and consequently in all cases where the appellate or revisional order varies the assessment, the original order goes and all steps already taken for the recovery of the demand became null and void and that, in such cases, it is the duty of the Income-tax Officer to issue fresh notice of demand in the prescribed form and serve it upon the assessee. The Act, therefore, provides under Section 3 that in cases where the appellate or revisional authority varies the assessment order, it shall not be necessary to take proceedings afresh or to serve fresh notices of demand except in the case of enhancement of assessment. It has been given retrospective effect so as to cover all notices of demand served even before the commencement of the Act. Having regard to the above object of the Act the proviso to Section 3(1)(c) has to be construed.

8. Section 3(1)(c) validates all proceedings in relation to arrears of taxes due under the various Acts referred to in the Schedule to that Act including the imposition of penalty and/or charging of interest, notwithstanding the variation of the assessment by the appellate or revisional authority. But the various provisos under Clause (c) deal with the consequential variation in the notice of demand already issued. The first proviso states that if as a result of any final order the Government dues (other than annuity deposit) have been reduced and the penalty imposed on the assessee for default in payment thereof exceeds the amount so reduced, the excess shall not be recovered and that if it has already been recovered it shall be refunded to the assessee on an application made by him to the taxing authority. There cannot be any dispute that this proviso is applicable to the facts of this case. Here the amount of tax as assessed originally was Rs. 75,661 and in respect of that a notice of demand has been issued, but this amount had been reduced as a result of the final order to Rs. 4,740. But by the time the final order quantifying the actual tax payable came to be passed, the penalty of a sum of Rs. 11,000 had been collected from the petitioner. In terms of the proviso referred to above, the petitioner is entitled to the refund of such penalty as exceeds the amount of tax ultimately levied.

9. The petitioner in this case, however, claims that the entire sum of Rs. 11,000 levied as penalty should be refunded. According to the petitioner there was in fact no justification for levying the penalty at all as no default has occurred on the respective dates when the orders of penalty were passed. It is pointed out that the penalty orders were passed on March 29, 1958, October 7, 1958, and December 26, 1958, by which time a sum of Rs. 5,000 which is more than the tax ultimately assessed had been paid. It cannot, however, be disputed that at the time when the penalty orders were passed, there was in fact a demand for Rs. 75,661 partly outstanding and, therefore, the orders levying penalty could not have been challenged then. It is also significant to note that the petitioner had not challenged the validity of the orders levying penalty at any time before, and he has allowed the same to become final. In view of the circumstances that at the time when the penalty orders were passed, there was a demand for payment of tax, presumably the petitioner did not challenge the same. It is only now after the tax has been reduced as a result of the final orders he seeks to question the penalty orders on the ground that there was no default at the time of the imposition of the penalty. We are of the view that the petitioner is not entitled to rely on the subsequent events leading to the reduction of the tax for questioning the validity of the penalty orders. Permitting the petitioner to do so would be in violation of the provision in Section 3(1)(c) which specificallystates that no proceedings in relation to the imposition of penalty shall be invalid by reason only that no fresh notice of demand was served on the assessee after the disposal of the appeal or the arrears of tax has been reduced in appeal. If the petitioner is not entitled to challenge the validity of the penalty orders, the only remedy open to him is under the proviso which says that the amount of penalty exceeding the tax as reduced will have to be refunded to the assessee. The word 'thereof' occurring in the proviso refers only to the amount of tax as originally assessed in respect of which penalty has been imposed. This is sufficient to repel the contention of the petitioner that the penalty if at all that could be collected from him should be for non-payment of the tax ultimately assessed. The petitioner also refers to the provision in Section 221(2) of the Income-tax Act, 1961, which provides that where as a result of any final order the amount of tax, with respect to the default in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the amount of penalty paid shall be refunded. But we consider it unnecessary to consider the scope of that provision, for, in our view, the case is governed by the provisions of the Indian Income-tax Act, 1922, and there was no similar provision in that Act.

10. The learned counsel for the petitioner then submits that the revenue will not be justified in retaining the amount of penalty equal to the tax ultimately determined, when in fact the amount of tax ultimately determined had been paid long before the penalty order was passed. But it is not possible for us to take equitable considerations while construing the statutory provisions in a taxing measure. The petitioner may be right in his submission that when the tax liability is reduced it is inequitable and unjust to enforce the penalty levied earlier for non-payment of the tax as originally assessed. But it is well established that the court is to be guided only by the expressed intention of a statute and the meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the court as to what is just or expedient. (Vide Commissioner of Income-tax v. Shahzada Nand and Sons, : [1966]60ITR392(SC) . As pointed out by Rowlatt J. in Cape Brandy Syndicate v. Commissioners of Inland Revenue, [1920] 12 T.C. 358.:

'.... in taxation you have to look simply at what is clearly said. There is no room for any intendment; there is no equity about a tax; there is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'

11. Here Section 3(1)(c) specifically validates the penalty orders notwithstanding that the amount of tax for non-payment of which penalty has been levied has been reduced in the final order. When the statute has specificallyvalidated the penalty levied earlier it is not open to the petitioner to invoke equitable considerations and question the validity of the orders of penalty. In our view the respondent was justified in holding that the petitioner is not entitled to the refund of the entirety of Rs. 11,000 levied as penalty. Thus the writ petitions have no merits and they are, therefore, dismissed with costs. Counsel's fee Rs. 250 (one set).


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