ABDUL KASSAM Vs. COMMISSIONER OF INCOME TAX
LAWS(BOM)-1962-8-14
HIGH COURT OF BOMBAY
Decided on August 16,1962

ABDUL KASSAM Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

TAMBE, J. - (1.)THIS is a consolidated reference under Sub -S. (1) of S. 66 of the Indian IT Act, arising out of an order made under S. 18A(1) and a notice of demand issued in pursuance of the order under S. 29 of the Indian IT Act to two partners, Abdul Kassam and Abdul Halim Valimahomed. We are here concerned with the asst. year 1957 -58, the relevant previous year being one ended on 2nd Nov., 1956. On 21st Nov., 1956, the ITO made an order under S. 18A(1) calling upon the partner, Abdul Kassam, to pay an advance tax of Rs. 4,473 in two equal instalments on 15th Dec., 1956, and 15th March, 1957. The ITO also similarly made an order under S. 18A(1) calling upon the other partner, Abdul Halim Valimahomed, to pay advance tax of Rs. 4,521 in similar two instalments on 15th Dec., 1956, and 15th March, 1957. This notice along with the notice of demand under S. 29 of the Act were served on both the partners on 22nd Nov., 1956. None of the assessees, however, paid any tax but exercised option under S. 18A(2) of filing an estimate. According to them, their share of income earned by them fell below Rs. 6,700 and, therefore, no tax in advance was payable by them. Both the partners, accordingly, filed estimates raising the aforesaid contentions on 5th Dec., 1957, whereunder they declared the tax payable by them as "nil". In due course both the partners filed regular returns -Abdul Kassam filed return of his share of income on 11th Sept., 1957, while Abdul Halim filed it on 5th Aug., 1957, -whereunder each one of them declared their income as amounting to Rs. 20,568. The ITO finding that tax was payable by both these partners on their income and finding that they had filed an estimate as tax payable "nil", issued a notice under sub - s. (3) of S. 28 calling upon them to show -cause why no penalty should be imposed on them. Both the partners showed cause. Two contentions were raised by both these partners before the ITO. The first was that the order under S. 18A(1) was itself illegal inasmuch as it did not afford an opportunity of paying the advance tax in four instalments as contemplated by S. 18A(1). In other words, the contention raised before the ITO was that a valid order under Sub -S. (1) of S. 18A could only be made before 15th of June and not thereafter. The order in the instant case having been made on 21st Nov., 1956, was bad in law and, consequently, no penal consequence was attracted by reason of the failure on the part of the partners to file a proper estimate. The second contention raised was that, on the date the partners filed the estimates, the accounts of the year ending 2nd Nov., 1956, were not closed and, therefore, it could not be said that each of the partners had filed an estimate, which he knew or had reason to believe to be untrue. In rejecting the first contention, the ITO placed reliance on the provisions of S. 18A(1)(b). As regards the second contention, the ITO held that the estimate was filed after the completion of the year and the assessee knew that it was not a correct return. At any rate, his failure to file a revised estimate by the 15th of March, 1957, clearly showed that the assessees knew that the estimates filed by them were not correct. In this view of the matter, the ITO imposed a penalty of Rs. 784 on the assessee, Abdul Kassam, and Rs. 798 on the assessee, Abdul Halim. Against these orders both the partners preferred appeals before the AAC and the AAC accepted both these contentions raised by the partners and allowed their appeals. In accepting the contentions of these partners, the AAC, after referring to the provisions of cl. (b) of S. 18A(1), observed :
"From the above it is clear that the ITO can demand payment under S. 18A within a shorter period and in lesser instalments provided the notice of demand was issued under S. 29 in pursuance of an order under cl. (a) of S. 18A(1). As mentioned above, in this particular case the notice of demand was issued for the first time on 21st Nov., 1956, and the ITO has not adduced before me any evidence that there was direction for the issue of the notice of demand in question prior to it. Hence the issue of the notice of demand under S. 29 in this case was not in pursuance of the order under cl. (a) of Sub -S. (1) of S. 18A."

(2.)FEELING aggrieved by the order of the AAC, the Department filed appeals before the ITAT. These appeals were accepted by the Tribunal. The Tribunal reversed the orders of the AAC and has restored those of the ITO. In their application under Sub -S. (1) of S. 66 both these partners prayed that questions on both these points should be referred to this Court. The Tribunal, however, did not accept the prayer of the assessee to refer the question as to whether there was any material to show that the assessee had filed an estimate of income, which he knew or had reason to believe it to be untrue. According to the Tribunal its finding on that aspect of the case was a finding of fact. The Tribunal, however, has referred the following two questions arising out of the contentions raised by the partners as regards the validity of the orders made under S. 18A(1) of the Act :
"(1) Whether the order made by the ITO under S. 18A(1) of the IT Act and the notice of demand served in pursuance thereto on 21st Nov., 1956, was valid ? (2) Whether on the facts and in the circumstances of the case the imposition of the penalty on the applicant under S. 28 r/w S. 18A(9)(a) of the Act was valid in law ?"

In order to appreciate the contentions raised by counsel for the parties, it would be convenient to refer to the relevant provisions of S. 18A, on which the arguments advanced before us are based.

"18A. Advance payment of tax. -(1)(a) In the case of income other than income chargeable under the head 'Salaries', the ITO may, on or after the 1st day of 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 previous year in respect of which he has been assessed, if that total income exceeded the maximum amount not chargeable to tax in his case by two thousand five hundred rupees. Such income -tax and super -tax shall be calculated at the rates in force for the financial year in which he is required to pay the tax, and shall bear to the total amount of income -tax and super -tax so calculated on the said total income the same proportion as the amount of such inclusions bears to his total income..... Provided that, where the previous year of the assessee in respect of any source of income ends after the 31st day of December and before the 30th day of April, the order in writing issued by the ITO requiring the payment of income -tax and super -tax on that source of income shall substitute for the four quarterly payments hereinbefore specified, three payments of equal amount to be made on the 15th day of September, the 15th day of December and the 15th day of March, respectively...... Provided further that, if after the making of an order by the ITO and before the 15th day of February of the financial year an assessment of the assessee or of the registered firm of which he is a partner is completed in respect of a previous year, later than that referred to in the order of the ITO, the ITO may make an amended order requiring the assessee to pay in one instalment on the specified date, or in equal instalments on the specified dates if more than one, falling after the date of the amended order, the tax computed on the revised basis as reduced by the amount, if any, paid in accordance with the original order; but if the amount already paid exceeds the tax determined on the revised basis, the excess shall be refunded. (b) If the notice of demand issued under S. 29 in pursuance of the order under cl. (a) of this sub - section is served after any of the dates on which the instalments specified therein are payable, the tax shall be payable in equal instalments on each of such of those dates as fall after the date of the service of the notice of demand, or in one sum on the 15th day of March if the notice is served after the 15th day of December."

(3.)MR . Trivedi, appearing for the assessee, contended that cl. (a) of Sub -S. (1) of S. 18A directs the ITO to make an order requiring the assessee to pay advance tax in four instalments mentioned therein. It, therefore, necessarily follows that it is not open to the ITO to make an order calling upon the assessee to pay tax in advance in instalments lesser than four. In support of his arguments Mr. Trivedi further placed reliance on the first proviso, which speaks of grant of three instalments in a case where the previous year of the assessee in respect of any source of income ends after the 31st day of December and before the 30th day of April. It is his argument that if it was open to the ITO to call upon an assessee to pay tax in advance by instalments lesser in number than four, then there was no occasion for enacting this proviso.


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