1. T. A. NO. 864-KB OF 1980-81, DECIDED ON 26TH JUNE, 1983. Versus 1. T. A. NO. 864-KB OF 1980-81, DECIDED ON 26TH JUNE, 1983.
ORDER
This appeal is directed against the order of the Appellate Assistant Commissioner, 'D' Range, ., whereby he has confirmed the levy of penalty under section 46(1) of the repealed income‑tax Act, 1922, on account of assessee's failure to pay tax on undisclosed income under section 3‑C read with Fifth Schedule of the Income‑tax Act. The facts stated at the bar are that on 31st August, 1976 the assessee‑appellant filed a declaration showing undisclosed income at Rs. 8 lakh. He did not pay the income‑tax payable on the undisclosed income declared by him before making the declaration but made an application under sub‑rule (2) of rule 3 of the Fifth Schedule for payment bf tax in ten monthly instalments. The Income‑tax Officer, in exercise of the discretionary powers conferred on him by the Central Board of Revenue through a Circular, allowed some concession/facility in respect of payment of tax. The assessee, however, failed to pay the tax even in terms of the order passed by the Income-tax Officer and that on 24th October, 1977 a sum of Rs. 2.13.300 was admittedly outstanding out of the total tax of Rs. 2,40,000. The Income‑.tax Officer, therefore, imposed a penalty under section 46 (1) of the Act at the rate of 2 % of the outstanding tax which worked out at Rs. 5,332. He also at the same time levied interest at 2%, per annum on the aforesaid arrears at Rs. 59,724. The assessee went in appeal before the leared Appellate Assistant Commissioner. It was pleaded on his behalf before first appellate authority that "for all purposes including the collection, section 3‑C read with Fifth Schedule is perfect and complete in itself" and further "that provisions of section 46 (1) are not applicable in the instant case as no demand was created". It was also urged that there is no provision under Fifth Schedule for imposing the penalty under section 46(1) of the Act. The learned Appellate Assistant Commissioner after making reference to the provisions of subsection (1) of section 46 and to the definition of the word "Tax" as contained in section 2(14) of the Act, held that the levy of penalty was proper. The operative part of his order which contains the reasoning as well, reads as under: ‑
"From the above definition it is clear that the tax payable consequent upon the declaration of undisclosed income under section 3‑C read with 5th Schedule is a tax for all practical purposes of the Act. It may also be pointed out that from the close scrutiny of the provisions of the 5th Schedule also I do not find any provision which prohibited the Income‑tax Officer in imposing penalty under section 46(1) of the repealed Act. It is, therefore, clear that the default was there and the Income‑tax Officer was competent to impose the penalty. Thus, the order imposing the penalty of Rs. 5,332 has correctly been made. The order is accordingly confirmed and the appeal is dismissed.
Appeal fails
2. Mr. Shaban, learned counsel for the appellant, relying upon the orders of the "Tribunal, dated 29th Inlay, 1.980, passed in 1. T. A. Nos. 858‑KB and 115‑KB of 1978‑79, and dated 10th March, 1983 in I. T. A. No. 501‑KB of 198081, reiterated the same contentions before its which were made before the learned Appellate Assistant Commissioner. He also placed reliance on the judgments of the Lahore High Court and the "Andhra Pradesh' High Court reported as (1976) 33 Taxation 258 and (19ft3) SO. I T R (8), respectively. In short, his contention in nutshell was that charge of income tax 'on undisclosed income under section 3‑C of the Act was subject to the provisions of the Fifth Schedule and not subject to the provisions of the Act, unlike sections 3‑A and 3‑B, nor the provisions of the Act relating to charge, assessment, collection and recovery of income‑tax were made applicable to it. Developing his arguments on the basis of the provisions contained in the Fifth Schedule to the Act and the Circular issued by the Central Board of Revenue in that connection, counsel maintained that the impugned Levy was illegal and unsustainable in law. In his‑ submission, since no notice of demand under section 29 was served upon the appellant in respect of tax payable on the undisclosed income, the provisions of section 45 of the Act Were inapplicable and hence the assessee could not be deemed to be in default so as‑to attract the provisions of section 46(I) of the Act.
3. We have given our earnest consideration to the submissions made by the learned counsel for the appellant and we find ourselves unable to uphold them. The two orders of the Tribunal, dated 29th May, 1980 and 9th March; 1983 (supra) are distinguishable on their facts and they are, therefore, not applicable to the facts of the instant case. In both these cases the application for instalments were found pending without any order having beers passed thereon by the Commissioner of Income‑tax. It was in consideration of this fact that the Tribunal held that the assessee could not be subjected to levy of penalty under section 46 (1) of the Act. The Lahore High Court was consi dering the application of section 46(1) of the Act in‑ the case of default of payment of tax levied under Martial Law Regulation No. 43/48. Their Lord ships cited with approval the following observations of the Appellate Tribunal for holding that the provisions of subsection (1) of section 46 were not adapted in regard to imposition of penalty: ‑
"That means that the provisions of subsection (1) of section 46 have not been adapted because they relate to the imposition of penalty. The provisions of the other subsections pf section 46 which relate to the recovery of tax would undoubtedly apply. The words levy assessment arid collection of income‑tax, do not include the power to levy a penalty. A penalty is not a mode of recovery of tax, section 46 contains provisions which can be divided into two parts: one part deals with recovery of tax and the other part deals with the imposition of penalty. Recovery of tax is one thing and the imposition of penalty is quite another, since otherwise there was no necessity for enacting section 47. "
The judgment of Andhra Pradesh High Court is based on its own facts which have no similarity to the facts of the instant case and hence wt need not deal with it at any length. We would at the outset like to point out that rule 4 as contained in Fifth Schedule clearly provides that 'where any person does not pay tax due from him as provided for in rule 3, be shall, without prejudice to his liability under any other provision of law (underlined try us for emphasis)* pay an additional amount of tax equal to 2% per annum for the period during which' the default continues. It is followed by a proviso which excludes the application of section 45‑A, which also provides for levy of additional tax for delayed payment but at a higher percentage, in the case of default under this rule. It is an undisputed fact that undisclosed income is chargeable to income‑tax and that the provisions of section 3‑C and the Fifth Schedule are the provisions of the Income‑tax Act. The provisions of section 46(1) or any other provision of the recovery of tax have, unlike section 45‑A been not excluded from the application of the income‑tax chargeable under section 3‑C and payable under the provisions of the Fifth Schedule. There i nothing in subsection (1) of section 46 of the Act that it will come into operation only when an assesses is in default in making payment of tax upon service of notice of demand under section 29 and not when he does not pa the tax due from him under any specific provision 4 law, such as, rule 4 of the Fifth Schedule. We cannot legally mad something in the section which is not there. It only speaks of an assessee being in default in making payment of tax. And there can be no denying the fact that assesses‑appellant was in default of making payment of tax when the Income‑tax officer passed the impugned order. As a matter of fact what we find is that the expression "the assessee is in default or deemed to be in default in making payment of tax has been used in subsection (1) of section 46‑A, which gives a clear indi cation of the intention of the legislature that the assesses who is actually in default or "is decreed to be in default'' in making the payment of tax within the meaning of section 45 of the Act is to be dealt with in accordance with provisions contained in Chapter VI of the Act. It may further be observed that if all the provisions of the. Act were excluded by section 3‑C and Fifth Schedule of the Act as pleaded by the learned counsel for the appellant then there was obviously no necessity for the legislature to have expressly excluded the application of section 45‑A by inserting a proviso to rule 4 by itself specifically make a mention that where an assessee does not pay the tax due from hint as provided in rule 3, he shall ‑be liable to all actions provided for under the law besides the additional tax leviable under rule 4 of the Schedule.
Before concluding we may add that we have also taken due note of rule 6 of the Fifth Schedule which gives certain concession and amnesty to a person who bad made a declaration under the Schedule and we ate clearly of the view that it too does not exclude the levy of penalty under section 46 (1) of the Act for default in making the payment of tax. The amnesty has bee extended only against the liability to any penalty or levy etc. in respect o income, save that of concealment of income or furnishing inaccurate particular of income, and not for default of payment of income‑tax, chargeable under section 3‑C of the Income‑tax Act.
4. For the aforesaid reasons, We would hold that the learned Apps Assistant Commissioner has tightly upheld the levy of penalty under section 46(1) and we do trot find any justification to interfere with his order. No exception can, in our opinion, be taken with regard to the impugned or which is strictly in conformity with the law.
5. In the result, the appeal fails and is hereby dismissed.
M.Z.M. Order accordingly.