THE COMMISSIONER OF INCOME-TAX, LAHORE ZONE, LAHORE Versus GAITEE ARA
MUHAMMAD ARRAM. J. This judgment will dispose of three reference applications (T, R. Nos. 48, 49 and 50 of 1974) made directly to the High the purposes of penal interest. A common objection to all the three appeals was also raised at the hearing before the Tribunal to the effect that subsection (7) of section 18‑A was not applicable to cases not covered by subsections (2) and (3) thereof and also to cases of mere delays in payment of the advance tax. In the opinion of the Tribunal the case of the assessee relating to the assessment year 1969‑70 needed to be reconsidered by the Income‑tax Officer inasmuch as her liability had to be worked out afresh under subsection (8) of section 18‑A. Moreover, subsection (11) of section 18‑A lays down that any income chargeable under the "capital gains" shall not be taken into account for the purpose of advance payment of tax, and, therefore, the Income‑tax Officer was duty bound the exclude the amount of the capital gains in making his computation for the purposes of section 18‑A. In these circumstances the Tribunal remanded the case of the assessee for the assessment year 1969‑70 to him for a fresh disposal. But with regard to the remaining two assessment years 1970‑71 and 1971‑72 the Tribunal observed as under:‑
"With regard to the remaining two years the departmental representative has not been able to rebut the argument of the appellant and we are also in agreement with the assessee that in case of delayed payment a penalty under section 46 (1) only could be imposed. Since the payment had already been made so there is hardly any occasion left for taking action under the aforesaid section of the Act. We would accordingly accept these appeals and cancel the order imposing the penalty interest in the two years."
6. In these circumstances the Commissioner of Income‑tax, Lahore has made these three reference applications directly to the High Court referring the following question of law said to arise out of the appellate order dated 15th of June, 1973 to the High Court for its opinion:‑
"(1) Whether on facts and in the circumstances of the case, the appellate Tribunal was justified in holding that the penalty (additional tax) was levied under subsection (8) and not under subsection (7) of section 18‑A of the Income‑tax Act?
(Relating to the assessment year 1969‑70).
(2) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that penalty was leviable under subsection (1) of section 46 and not additional tax under subsection (7) of section 18‑A of the Income‑tax Act. (Common to the two assessment years 1970‑71 and 1971‑72)."
7. We have heard the learned counsel for the parties in these three reference applications. Briefly speaking subsection (1) of section 18‑A lays down that as assessee shall pay quarterly to the credit of the Central Government on the 15th day of September, 15th day of December, 15th day of March and 15th day of June in each financial 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 under section 23. Subsection (2) of section 18‑A deals with the case of any assessee who is required to pay tax under subsection (1) and estimates that the part of his income to which subsection applies is less than the income he is required to pay the tax and accordingly wishes to pay an amount less than the amount which he is required to pay. Subsection (3) concerns persons who w$TP 1n9t hitherto assessed in any of the previous year. Subsection (4) deals with the case where part of the income of the assessee consists of income in the nature of commission. From this reading of subsections (2), (3) and (4) it is evident that none of these subsections was applicable to the instant case. In turn under subseciton (7) of section 18‑A the Income tax Officer may direct the assessee to pay an additional amount of tax in case the assessee has under‑estimated the advance tax payable under subsections (2) and (3) or wrongly deferred the payment of the tax under subsection (4). Therefore, it is evident that subsection (7) of section 18‑A of the Act was not in terms applicable‑ to the facts in this case. As such the Income‑tax Officer was not at all justified in imposing the additional tax under this subsection for the assessment years in question.
8. Moreover, we find that in respect of the last two assessment years in question the assessee did make the payments of the amount of the advance tax though not in time. But in the opinion of the Income‑tax Officer these delayed payments did not, absolve the assessee of the default committed by her in making the payments of the instalments of the advance tax within time. He, therefore, levied additional (penal) tax amounting to Rs. 4,034 and Rs. 3,390 under section 18‑A (7) in respect of the last two assessment years in question. In this connection on behalf of the assessee it was argued before the Tribunal that the case of the assessee for the delayed payment was not hit by subsection (7) but by subsection (9) of section 18‑A read with section 46 (1) of the Income‑tax Act. In fact in that connection the Tribunal observed that the departmental representative was not able to controvert this contention advanced on behalf of the assessee. As already discussed in the preceding paragraph subsection (7) of section 18‑A is not in terms applicable to this case. On the other hand subsection (a) of section 18‑A inter alta expressly lays down that if any assessee does not pay on the specified date any instalment of tax that he is required to pay under subsection (1) he shall be deemed to be an "assessee in default" in respect of such instalment or instalments. In turn subsection (t) of section 46 further lays down that when an assessee is in default in making a payment of tax, the Income‑tax Offcer may in his discretion direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty.
9. For all these reasons the Tribunal was justified in holding that on the facts and in the circumstances of this case on account of the delayed payments by the assessee towards the instalments of the advance tax due from her for the assessment years 197071 and 1971‑72, penalties could be8 imposed against her in accordance with subsection (9) (a) of section 18‑A read with section 46 (1) of the Act and not the additional tax under subsection (7) of section 18‑A of the Act. We have, therefore, no hesitation) in returning our answer to the second question reproduced above in the affirmative.
10. Now turning to the first question referred to the High Court, the regular assessment for the assessment year 1969‑70 in question was itself completed against the assessee also on 30‑12‑1971. But prior to it the latest completed assessment for the assessment year 1967‑68 was made on 16‑12‑1968 and she was charged to tax in the sum of Rs. 44,343. On this basis, therefore, in accordance with section 18‑A (1) it was obligatory on her to have made the payment of the advance tax Rs. 44,343 in two equal instalments due on 15‑3‑1969 and 15‑6‑1969. But she merely deposited Rs. 27,000 on 20‑6‑1969 towards this account. We have already observed above that the provisions of subsections (2), (3) and (4) of section 18‑A were not at all attracted to the facts and circumstances of this case and as such the Income‑tax Officer was not justified in proceeding against the assessee under section 18‑A (7) of the Act. On the other hand as stated above in respect of the assessment year 1969‑70 in question the regular assessment was itself completed on 30‑12‑1971. In this connection subsection (8) of section 18‑A lays down that where, on making the regula assessment, the Income‑tax Officer finds that no payment of tax has been made in accordance with subsections (1) to (7) of this se;;cion additional tax calculated in the manner laid down in subsection (6) shall be added to C the tax determined on the basis of the regular assessment. In these circumstances, therefore, the Tribunal was justified in holding that the liabilities of the assessee to additional tax had to be worked out under subsection (8) of section 18‑A of the Act. Accordingly our answer to the first question is returned in the affirmative.
These three references are returned accordingly. But there shall be no order as to costs in the circumstances of the case. s. A. H References answered in affirmative.