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TMI Blog1986 (4) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... 221 of the Act why penalty be not imposed for non-payment of the balance demand of Rs. 10,438. After cause had been shown, by order dated February 3, 1973, the Income-tax Officer imposed a penalty of Rs. 1,500 for non-payment of the advance tax payable as per his own estimate. The Appellate Assistant Commissioner on appeal confirmed the order of the Income-tax Officer. The Tribunal, however, cancelled the imposition of penalty. The question is, if the demand or obligation of the assessee under the law had not been carried out, would he be said to be in default and would penalty be leviable? It is not in controversy that the advance tax of Rs. 12,100 was payable by March 15, 1971. It is undisputed that it was not paid by that date. It is also beyond the controversy that the entire tax due was paid by the assessee on February 16, 1972, when he filed a regular return. On these facts, it is undisputed that the assessee was not in default in carrying out his legal obligations under section 212(3A). Section 221 provides that when an assessee is in default in making payment of tax, he shall be liable by way of penalty to pay such amount as the Income-tax Officer may direct. This pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, rd edition, volume 2, it is stated as follows: " The English cases suggest that declaratory statutes were enacted to affirm old customs which had either fallen into disuse or had become disputable and were enacted merely to clarify the state of the common law and affirm it as it was. " (Paragraph 2902 at page 218). At paragraph 2904, it is stated as follows : " Statutes declaratory of the common law are interpreted co-extensively with the common law and no change in meaning is presumed to have been intended by the enactment. " At paragraph 2905, it has been stated that- " Declaratory statutes because they do not change the common law should apply retroactively for they do not change the past state of the law... They were not applied retroactively when rights were vested or litigation settled... In all other cases, their retroactive effect remained unquestioned." Craies on Statute Law, 6th Edition, at page 394, has the following to state in regard to explanatory and declaratory Acts. According to it, they are retrospective. " Explanatory and declaratory Acts retrospective. Where a statute is passed for the purpose of supplying an obvious omission in a fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not paying the demand by March 15, 1971. The fact that the taxes had been paid in terms of regular assessment before the levy of penalty was of no consequence. He would still be liable to pay the penalty in terms of section 221 and its Explanation. I should like to make it absolutely clear that even de hors the Explanation, section 212(3A) fixes the time when a person is a defaulter, i.e., when he has not acted in terms of section 212(3A). The conclusion is, therefore, inescapable that the assessee had defaulted in payment of advance tax. Learned counsel for the assessee submitted that the Central Board of Direct Taxes (CBDT) had issued Circular No. 18-D(XLV-14) of 1963 dated 15-7-1963 in regard to levy of penalty under section 221 which reads as follows : " 429. Levy of Penalty under section 221-Clarification regarding. Attention is invited to Board's Circular No. 2-D of 1950, dated 1st March, 1950, in which Income-tax Officers were informed that in cases where the tax due had been paid up before the imposition of a penalty under section 46(1) of the Indian Income-tax Act, 1922, the imposition of penalty would not be proper. Sub-section (1) of section 221 of the new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly issued against the provisions of the Income-tax Act in regard to the payment of advance tax. Thus contended senior standing counsel for the Revenue. Learned counsel for the assessee, on the other hand, relied upon the case of Navnit Lal C. Javeri v. K. K. Sen, AAC [1965] 56 ITR 198 (SC), where Gajendragadkar C.J., observed as follows (at p. 203): " It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the provision. The officers were, therefore, asked to intimate to all the companies that if the loans were repaid before the 30th June 1955, in a genuine manner, they would not be taken into account in determining the tax liability of the shareholders to whom they may have been advanced. In other words, past transactions which would normally have attracted the stringent provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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