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Petitioner: RUSTOM F. COWASJEE AND 2 ormas VS Respondent: CENTRAL BOARD OF REVENUE AND 2 JUDGMENT
Court Name: Sindh High Court Judge(s): Ajmal Mian, Naimuddin Ahmed, Syed Haider Ali Pirzada Title:RUSTOM F. COWASJEE AND 2 ormas vs CENTRAL BOARD OF REVENUE AND 2
JUDGMENT
Reported As: 1985 PTD 529 Result: Reference answered Judgment JUDGMENT ' AJMAL MIAN, J.-(a) In the instant Full Bench reference the controversy which is sought to be resolved is as to the construction of section 45-A (hereinafter referred to as the section) of the Income-tax Act, 1922 (hereinafter referred to as the Act) enacted by Act XVI of 1963 (which was enforced with effect from 1-7-1963 and was subsequently amended by Act XI of 1966). To put it precisely, the question in issue is, whether the section can be pressed into service in respect of non-payment of the tax which had become due and payable under an assessment order passed and a demand notice issued under section 29 of the Act prior to 1-7-1963. In order to resolve the above controversy, it may be advantageous to reproduce the section in extenso as it stood originally under Act XVI of 1963 and as amended by Act XI of 1966, which read as follows :- "45-A. (Under Act of XVI of 1963).-Where any assessee fails to pay the tax due from him, he shall without prejudice to his liability under any other provisions of law, be liable to pay an additional amount of tax equal to six per cent per annum of the amount of tax due from him from the date on or before which it was originally made payable (hereafter referred to as the said date) to date of its payment : ' Provided that where at the request of the assessee, the tax is allowed to be paid in instalments, such additional amount of tax shall be payable in respect of each instalment from the said date to the date on which it is paid." "45-A. (As amended by Act XI of 1966) Additional tax for delayed payments.--Where any assessee- (a) fails to pay the tax due f; om him, or
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(b) has paid tax under section 22-A and the tax so paid is less than 80 per cent of the tax payable as a result of completion of the relevant assessment under section 23, he shall, without prejudice to his liabi lily under any other provision of law, pay an additional amount o tax equal to eight per cent, per annum of- (i)in cases referred to in clause (a), the amount of tax due from hi from the date on or before whi'lt it was originally made payabl (hereafter in this section referred to as the said date) to the dat of its payment : (ii) in cases referred to in clause (b), the amount by which the tax pal under section 22-A falls short of 80 per cent of tax payabl under section, 23, from the date of payment of the tax under sectio 22- A to the date of completion of the assessment under section 23 : ' Provided that where at the request of the assessee, the tax is allowe to be paid in instalments, such additional amount of tax shall b payable in respect of each instalment from the said date to the dat on which it is paid : ' Provided further that where, upon an appeal under section 33, o revision under section 33-A, or a reference to the High Court unde section 66, or an appeal to the Supreme Court under section 66- A, the amount on which tax was payable under this section is reduced, the additional amount of tax shall be reduced accordingly and the additional amount paid in excess, if any shall be refunded together with the amount of tax that is refundable." (b) It may be observed that I have underlined* the words in the unamended and amended section quoted hereinabove which have direct bearing to the point in issue. It may be noticed that the same are identical except that the rate of additional tax has been substitututed by eight per cent in place of six per cent in the amended section. The above underlined* words provide that where any assessee fails to pay the tax due from him, he shall without prejudice to his liability under any other provision of law, pay additional amount of tax equal to eight per cent per annum of the amount of tax due from him from the date on or before which it was originally made payable to the date of payment. ' It may be pertinent to point out that there is no express provision in the section providing that the same shall be applicable retrospectively as was provided for example while enacting subsection (4-AA) to section 15-BB of the Act by Finance Ordinance, 1972 and while amending some other provisions of the Act. 2. (a) It has therefore, been contended by Mr. Ali Athar, learned counsel for the applicant that since there is no express provision in the section to make it applicable retrospectively, the additional tax cannot be levied in respect of the tax, which had become due and payable prior to 1-7-1963. (b) On the other hand, it was urged by Mr. Waheed Farooqui, learned counsel for the respondent that the section is applicable w. e. f. 1-7-1963 even n respect of the tax, which had become due and payable under the assessm ent orders passed prior to 1-7-1963. 3. There is not much case-law on the construction of the section. However, the following cases have been referred to by the learned counsel for the parties (i) M. Shakeel Saigal v. Income-tax Officer Companies (etc.) PLD 1976 Lab. 616, in which inter alia it was held by a Division Bench of the Lahore High Court that the additional tax provided for in section 45-A is in the nature of interest or penalty. But the question, whether the above provision is applicable prospectively or retrospectively was not involved. (ii) Taimur Shah v. Commissioner of Income-tax PLD 1976 Kar. 1030. In the above case the facts were that the applicant assessee's assessment for the charge year 1958-59 (supplementary) was finalized on 31-12-1964, whereas his assessments for the charge years 1939-60, 1960-61 were finalized some time in the year 1965. The demand notice for the charge year 1958-59 was issued on 9-1-1965, whereas demand notices for the other two years were served on the assessee on 4-7-1965 and 20-7 1965 respectively. The applicant assessee had failed to pay
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the tax even after the service of the above notices, the Income-tax Officer by separate orders passed in September, 1965 imposed additional tax on the assessee for each of the 3 charge years in question. The assessee challenged the above levy of the additional tax through an Income-tax Reference to this Court under section 66 (1) of the Act. It was urged by the learned counsel for the applicant assessee that the additional tax could not have imposed as the charge years in respect of which the additional tax was imposed, were years prior to the enactment of section 45-A. On the other hand it was urged by the learned counsel appearing for the respondent department that if the tax due remained unpaid notwithstanding that an assessment order might have been passed and a demand notice might have been issued under section 29 of the Act prior to 1-7-1963, the assessee was liable to pay additional tax. A Division Bench of this Court while dealing with the above contentions observed as follows :- "The provisions of the aforesaid section come into play only when an assessee fails to pay the tax due from him. It is, therefore, to be seen when a tax is due from a person leaving aside the deduction of tax at source under section 18 or the payment of advance tax under section 18-A, neither of which provisions are applicable in the instant case, tax is to be determined and assessed under the provisions of section 23 of the Act, mainly, on the basis of the returns of income to be made under section 22. On such assessment being made, the tax becomes due and a notice of demand is to be issued under section 29 of the Act specifying the sum due and payable. The amount specified in the notice of demand is required to be paid within the time specified in the notice, as provided in section 45. An assessee thus would be deemed to have failed to pay the tax due from him if he fails to pay the tax by the date specified in the notice of demand issued under section 29. In the instant case, as already pointed out, the three notices of demand for the three charge years in question were all issued in September, 1965 much after section 45-A had been added to the Income-tax Act. As such the assessee's failure to pay the tax due from him occurred after section 45-A had become a part of the Income-tax Act. No question, therefore, of retrospective operation of section 45-A arises in the instant case. ' Mr. S. A. Nusrat, the learned counsel for the Revenue, also attempted to argue that the words 'fails to pay the tax due from him' included tax due for the past years and, therefore, in a sense section 45-A is retrospective in its operation . ' We have, however, pointed out that under the scheme of the Income-tax Act the assessee became liable to pay the tax due from him for the three charge years in question when his assessm ent for those years was made notice of demand was issued to him. These actions were taken much after section 45-A became a part of the Income-tax Act, We would, therefore repeat that the liability of the assessee for the additional tax arose after the addition of section 45- A and the question of giving retrospective operation to section 45-A does not really arise in the instant case." (iii) Mian Hameed Ahmad (of Premier Cloth Mills Ltd. Lahore V. Income Tax ufficer (Investigation II), Lahore PLD 1977 LA. 1168. By the above-reported judgment 4 writ petitions filed for challenging the levy of the additional tax under section 45-A on the arrears of Income-tax due from the petiioners for the assessment years 1949 to 1963 for the period commencing from 1-7-1963 expiring on 30-6-1964 were allowed by a learned Single Judge of the Lahore High Court, Shafiur Rahman, J. (as he then was). It may be advantageous to reproduce paras. 5 and 6 of the above judgment, which read as follows :- "5. An examination of section 45-A of the Income-tax Act, makes it clear that it provides the date from which, the date upto which, and the rate at which the additional tax is to be levied and realised. There is, therefore, no scope either for Department or for this Court to depart from such a manifest legislative intent as is found in the express words. The rate of additional tax and the date upto which it was leviable are not in dispute in the present case because they have been correctly
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determined and applied. However, the dispute is with regard to the date from which such additional tax was to be computed. The date prescribed in the law is 'from the date on or before which it was originally made payable.' In all cases in hand it is admitted that the date so prescribed by the Department for the payment of the dues as old as of 1949-50 or of 1951-52 was prior to 1-7- 1963. If the Department or the respondents were to follow the letter of the law they had no choice in the matter to adopt 1-7-1963 which is the date of enforcement of the Act as the date from which the additional tax would be leviable. The logically consistent stand would have been to levy the additional tax from the date on or before which the tax was originally made payable or in case it amounted to giving a retrospective effect to the provision to apply it to a case where such a date fell after 1-7-1963 and not on any earlier date. 6. It is not the case of the Department that they are well within their right to demand the additional tax from a date earlier than 1-7-1963 and this would appear to be the correct legal view in interpreting and applying provisions of a fiscal statute imposing a penalty. The Legislature's intention to give it retrospective effect being not manifest, it has to be applied prospectively to the demands created after the provision was enacted. The Legislature having specified the date from which the rate at which and the date upto which such an additional tax would be leviable has left no choice for anyone ; not even for the Department to substitute a date of its own liking, i,e, 1-7- 1963. This would amount to reading words in the statute which are not there. In the circumstances, these petitions are allowed with costs and the application of section 45-A to demands already finalised and made payable before 1-7-1963 is held to be without lawful authority and of no legal effect." (iv) The Commissioner of Income-tax, Karachi v. Nisar Ahmed 1984 PTD 189, in which the question before a Division Bench of this Court was, whether the additional tax under section 45-A of the Act could be levied for the assessm ent year 1954-55, of which the assessment order was made on 30th June, 1959. It was held that the view taken by the Tribunal that the above additional tax could not have been levied was correct. It was further held that section 45-A when introduced by Finance Acts, 1963 and 1966 did not make its operation with retrospective effect and that a penal .Provision cannot be made applicable retrospectively unless this is so provided by statute itself. It may be pointed out that in the above case, the learned counsel for the department conceded the above legal proposition. 4. It may be pointed out that the ratio of the Taimur Shah's case decided by a Division Bench of this Court, referred to hereinabove in para 3 (ii) seems to be that if an assessment order and a demand notice thereof was issued subsequent to 1-7-1963, the section for levying additional tax could be pressed into service irrespective of the fact that the charge year was of prior to the above date. But in the judgment there is no discussion as to the effect of the use of the words "from the date on or before which it was originally made payable" employed in the section. ' Whereas in the above case of Mian Hameed Ahmed the learned Single Judge of the Lahore High Court had taken notice of the use of the above words but concluded that the section was not applicable to the cases in which assessment orders were passed prior to 1-7-1963 in respect of the charge years prior to the above date. ' It may further be pointed out that in the above recent case of Commissioner of Income-tax v. Nisar Ahmed decided by another Division Bench of this Court, it has been held that the section is not applicable in respect of an assessment order pissed prior to 1-7-1963. But the judgment does not dilate on the import of the words "from the date on or before which it was originally made payable". It may again be pointed out that factually the learned counsel appearing for the department conceded to the above legal position. 5. As pointed out hereinabove there is no -express provision providing the application of the section retrospectively, the question, therefore, in issue is that, whether the Legislature by
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employing the above words has manifested its intention to make the section applicable retrospectively. In this connection, it may be pertinent to observe that the section was to become a part of the Act and was intended to stay on the statute book for all time to come. In clause (a) of the section the words employed are "fails to pay the tax due from him", which being in present tense indicate that the section was to operate prospectively and not retrospectively. Whereas the factum of employing of the aforesaid words namely, "from the date on or before which it was originally made payable" make the provision capable of being applicable retrospectively. ' In my view the above apparent discrepancy is reconcilable. This may be explained by giving an example, say an assessm ent order is made and a demand notice is issued under section 29 of the Act in August, 1963 but the assessee concerned does not pay the due tax. In this case, if the Income-tax Officers invokes the section for levying additional tax on 1-12-1963, the question will arise, whether the Income-tax Officer should order the payment of additional tax at the rate given in the section for future from the date of the passing of the order or should it be made payable from the date of the original assessment order. The answer to the question is provided in the section itself, namely, from the date when the tax was originally made payable. The other view can be that the section covers even the cases in which the assessment orders were made and the demand notices were issued prior to 1-7-1963. Since two views are possible and as the provision is of a nature in a fiscal statute, the view which favours the tax-payers is to be preferred. It may again be pointed out that the respondent Department's stand before us is not that the additional tax is payable even for the period prior to 1-7-1963 in respect of an assessment order made and a demand notice issued a few years prior to the above date. The department's above stand is not reconcilable if I were to construe the above words namely, "from the date on or before which it was originally made payable" as conveying the meaning that the above date would include even a date of an assessm ent order passed and a demand notice issued a few years prior to the above date of 1-7-1963. This aspect has also been highlighted by Shafiur Rahman, J. In the above Lahore case of 1977. 6. In this regard, it may be pertinent to quote the observations of the Hon'ble Supreme Court in the case of Radha-Shyam Agarwala v. Commissioner of Income-tax (1), which read as follows "once the liabilities of the assessees have come into existence they cannot be altered in quantum, extent or character except by directIB retrospective leg is lation." ' Reference may also be made to the relevant passages from Maxwell on the Interpretation of Statutes 12th Edn. p. 256 and Crawford on the Construction of Statutes 1940 Edn. At pp. 562 to 564 which read as follows :- `Maxwell'.-Statutes imposing burdens.-Statutes which impose pecuniary burdens are subject to the same rule of strict construction. It is a well-settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties : the subject is not to be taxed unless the language of the statute clearly imposes the obligation, and language must not be strained in order to tax a transaction which, had the Legislature thought of it, would have been covered by appropriate words. "In a taxing Act," said Rowlatt, J., 'one has to look merely 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. Tut this strictness of interpretation may not always enure to the subject's benefit, for "if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. . . . . ' Crawford. In General.-Retrospective legislation is looked upon with disfavour, as a general rule, and properly so because of its tendency to be unjust and oppressive. This disfavour is so great that some
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{{FOOT NOTE}} (1) PLD 1960 S.0 187 {{FOOT NOTE}} of our state constitutions contain provisions which expressly prohibit the enactment of retrospective legislation. Nevertheless, even in the absence of constitutional provisions of this character, statutes, with but few exceptions, should, if possible, be construed so that they will have only prospective operation. Indeed, there is a presumption that the Legislature intended its enactments to have this effect to be effective only in future. This is true because of the basic presumption that the Legislature does not intend to enact legislation which operates oppressively and unreasonably; and retrospective laws will generally have such operation. Consequently, in the absence of any indication in the statute that the Legislature intended for it to operate retrospectively; it must not be given retrospective effect. If per chance any reasonable doubt exists, it should be resolved in favour of prospective operation. In other words, before a law will be construed as retrospective, its language must imperatively and clearly require such a construction. ' Moreover, in this connection, as a general rule, a statute expressed in general terms and in the present tense will be given prospective effect, and considered applicable to conditions coming into existence subsequent to its enactment, even though they were not actually known at the time of the enactment." 7. It will not be out of context to point out that prior to the enactment of the section the Act contained section 44, subsection (1) of which provided that "when an assessee is in default in making the payment of tax the Income-tax Officer 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". In presence of the above provision, it cannot, therefore, be urged that there was no provision prior to the enactment of the section for penalising a defaulting assessee and, hence the Legislature intended to provide a provision retrospectively to deter the tax-payers, who were in arrears. 8. I am, therefore of the view that the section cannot be pressed into service in respect of a tax amount, which had become due and payable on a date prior to the enactment of the section i,e, prior to 1-7-1963. ' NMMUDDIN, J.-I have had the advantage of reading the opinion by my learned brother Ajmal Mian, J., expressed on the question of interpretation of section 45-A of the Income-tax Act, 1922 (hereinafter called the Act) as added to Income-tax Act, 1922, by the Finance Act, 1963, and as substituted by the Finance Act, 1966. It is desirable that I should also express my opinion for I have comet to the conclusion that the provisions of section 45-A would apply prospetively but for a different reason. 2. A perusal of this section shows that it provides payment of , additional tax on the amount of tax due from an assessee from the date on or before which it was originally made payable to the date of its payment. Therefore, the question is whether the provisions would also apply to the dues which had become payable before the addition of section 45-A to the Act or they would apply only to those dues which fall and are made payable after the addition of the said provisions in the Act. 3. However, before proceeding furiher I may state the relevant rules of interpretation. It is the fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very! Clear in terms of the Act, or arises by necessary and distinct implication. See The Income-Tax Officer (Investigation) Circle I, Dacca and another v. Sulaiman Bhai Jiwa and others (1), Noor 'Muhammad v. The Province of West Pakistan (2) and Kamruzzaman v. The, Government of East Pakistan and others (3). (i) I may also refer to a Full Bench case of Patna High Court namely, BannwariGope and others v. Emperor (4) wherein after examining a large number of cases, following principles inter alia, were
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held to be well-settled :- "(1) Upon the presumption that the Legislature does not intend to enact what is unjust, every statute which takes away or impairs a vested right acquired under the existing law or creates a new obligaAion or imposes a new duty or attaches a new disability in respect of transactions or considerations already passed must be presumed to be intended not to have retrospective operation; (2) if there are words in the enactment which either expressly state or necessarily imply that the statute is to be given retrospective operation, then the Act should have retrospective operation even though the consequences may appear unjust and hard ; (3) a statute is not to be construed to have greater retrospective operation than its language renders necessary." (ii) Reference to a passage from 'Statutory Construction" by Crawford, 1940 Edn., pp. 564, 565 would also be of advantage. It reads :- "But where an intention properly appears that the statute was inten-' ded to operate retrospectively, such operation must be confined as closely as possible. Still, if the legislative intent clearly requires it, complete retroactive effect must be given, and it does not matter how the statute or its legality is affected. This principle is equally applicable where the retroactive effect is required through implication. See : Smallwood v. Gallardo, 275 U S 56, 72 L Ed. 152; Goshen v. Stoningt-On, 10-A, Dec. 121 ; Filipkowski v. Springfield Fire and Marine Ins Co., 206 78 A L R 613)." (iii) It may also be useful to quote a passage from "Maxwell on the Interpretation of Statutes", 12th Edn., p. 215 which reads as follows : - "Upon the presumption that the Legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation. They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a…
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