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TMI Blog1954 (8) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of his business (Maru year 2002/3 and 2003/4). The accounts of the managed company were passed in the meeting of the shareholders held on 31st October, 1947, and 26th July, 1948, for the assessment years 1947-48 and 1948-49, respectively. 3. The assessee did not pay to the Income-tax authorities advance tax as required by section 18A(3) of the Income-tax Act. The Income- tax Officer, therefore, levied penal interest for non-payment of advance tax, ₹ 3,549-11-0 and ₹ 9,525-2-0, respectively, for the two years under reference, under section 18A(8). The assessee went in appeal to the Appellate Assistant Commissioner in respect of the orders passed by the Income-tax Officer levying penal interest. The Appellate Assistant Commissioner heard the appeals and held that no appeals lay to him against the imposition of penal interest by the Income-tax Officer. Copies of the orders of the Appellate Assistant Commissioner and the copies of the orders of the Income-tax Officer are, respectively, annexures 'A' and 'B' and form part of the case. 4. The assessee came up in appeal to the Tribunal from the orders passed by the Appellate Assistant Commissioner. Two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 18A(8) of the Act. Now, section 18A is a new section which was inserted in the Act by Act XI of 1944 and it contains a machinery for assessment of advance tax. Sub-section (1) deals with the case of an assessee who is an old assessee and who has to pay advance tax on the basis of his previous income, and sub-section (2) enables such an assessee to make an estimate if in his opinion the income of the subsequent year is likely to be less. Sub-section (3) deals with the case of a new assessee, and in his case he has to make an estimate himself and if he does make an estimate then he has got to pay advance tax in the manner laid down in that subsection. The assessee in this case was a new assessee but he did not make any estimate under sub-section (3). Sub-section (6) of section 18A provides that where an assessee has paid tax under sub-section (2) or (3) and the payment of advance tax is less than 80 per cent. of the final assessment of his income in the particular year he is liable to pay interest at the rate of 6 per cent. and reference may be made to the third proviso to this sub-section which is to the following effect: Provided also that, where, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reference before us. Now, it is perfectly true that the expression assessment has been very widely construed and it has been observed that it bears a different meaning according to the context in which it is used, and we accept Mr. Kolah's contention that in section 30 we must construe the expression assessed in its widest connotation. The Privy Council in a well-known passage in Commissioner of Income-tax, Bombay Presidency and Aden v. Khemchand Ramdas [1938] 6 I.T.R. 414 at p. 416 points out that one of the peculiarities of most Income-tax Acts is that the word assessment is used as meaning sometimes the computation of income, sometimes the determination of the tax payable and sometimes the whole of the procedure laid down in the Act for imposing liability upon the taxpayer, and their Lordships point out that the Indian Income-tax Act is no exception in this respect. Therefore assessment may not only be the computation of the income, it may not only be the determination of the amount of tax payable, but it may refer to the whole procedure laid down in the Act for imposing liability upon the taxpayer. But, in our opinion, it is clear that when the Privy Council r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is an exaction for the support of Government, nor can it be suggested that a penalty is money raised for the purpose of Government by means of contributions made from individual persons. We are sure that government would not like to carry on the State by means of penalties imposed on assesses. They would rather wish that the assessees were honest and paid their taxes than they were compelled to pay penalty. There is also clear indication in the Act itself that the Legislature did not intend to provide for a right of appeal against the imposition of penal interest. There are various other sections in the Act where power is given to the Income-tax authorities to impose a penalty, and we find that in these cases an appeal has been specifically provided. Now, for instance, there is a penalty provided under sub-section (2) of section 25, there is a penalty provided under section 28, there is a penalty provided under sub-section (6) of section 44E and sub-section (5) of section 45 and sub-section (1) of section 46, and in all these cases section 30 specifically provides for a right of appeal. It is also interesting to note that under section 29 the Legislature has made a distinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. Section 18A in terms excludes income which falls under section 18 in respect of which tax has to be paid at the source. But, in our opinion, Mr. Kolah's grievance is not justified because if the Income-tax Officer were to take the view that a certain income does not fall under a head which falls under section 18, it would be open to the assessee to challenge that decision in the appeal against his regular assessment and to get the appellate authority to hold that the income falls under section 18 and therefore section 18A has no application. This right would permit the assessee to escape wholly or partially from the consequences of penal interest. Again it would be open to the assessee to urge before the appellate authority that the income upon which the quantum of interest was charged should be reduced and if such quantum was reduced then again the penal interest would also be reduced, because the whole object of the third proviso to section 18, sub-section (6), is to bring about automatic revision in the rate of interest. Therefore the scheme of the Act is that penal interest must follow upon the regular assessment; the appeal should be against the regular assessment and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y advance tax. It is only on his being assessed under the regular assessment that it has been found that he should have made an estimate under sub-section (3) of section 18A and paid advance tax and therefore he is liable to pay penalty. Therefore the decision of the Income-tax Officer is not that the assessee is liable to be assessed to payment of advance tax. That stage having long past, that question cannot arise, but his only decision is that on his failure to pay advance tax which the assessee was liable to pay he is liable to pay penal interest. Now, Mr. Kolah says that he should be entitled to contest the underlying assumption in the Income-tax Officer's order that he was liable to pay advance tax and that is the right of appeal which he is claiming. We should have hesitated a great deal before coming to the conclusion that the assessee had no right of appeal if we felt that we were denying to him the right of contending that he was not liable to pay advance tax at all and therefore he was not liable to pay a penalty. But in our opinion that right is not really denied to him, and as we have already pointed out when the assessee appeals against his regular assessment it i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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