GURSAHAI SAIGAL vs. COMMISSIONER OF INCOME-TAX, PUNJAB

CIVIL APPEAL No. 10/1962Supreme Court[1963] 3 S.C.R. 89331 August 1962Bench: 3 JudgesAuthor: J.L. KAPUR, A.K. SARKAR, M. HIDAYATULLAH12 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that Section 18A(8) is a machinery provision for the assessment of interest, and its plain effect is to impose a liability to pay interest. While Section 18A(8) states that interest should be calculated in the manner laid down in sub-Section (6), this machinery provision must be interpreted to make it workable and prevent the clear intention of the legislature from being defeated. Therefore, sub-Section (6) should be read as 'from the 1st day of January in the financial year in which the tax ought to have been paid' when applied due to sub-Section (8). In a case where no tax was paid, the shortfall contemplated in sub-Section (6) would be the entire 80% of the tax determined on regular assessment. The Court also noted that the penalty under sub-Section (9) is in addition to the liability under sub-Sections (6) and (8) and does not affect their construction. The appeals were dismissed, upholding the High Court's decision.

What were the facts?

The assessee was charged with interest under Section 18A(8) of the Indian Income-tax Act, 1922, for failing to submit an estimate of his income and pay tax as required by Section 18A(3). The assessee contended that interest could not be charged because it could not be calculated in the manner laid down in Section 18A(6), as he had not paid any tax at all. The Appellate Commissioner rejected this contention, but the Appellate Tribunal did not. The Commissioner of Income-tax then referred a question to the Punjab High Court, which answered it against the assessee. The assessee filed three appeals to the Supreme Court, one for each of three assessment years.

What were the issues?

1. Whether, on a true construction of sub-Sections (6), (8), and (9) of Section 18A of the Indian Income-tax Act, 1922, interest referred to in sub-Section (8) is chargeable for the failure of an assessee to submit an estimate of his income and pay tax as required by sub-Section (3). Assessee's Contention: Interest cannot be charged because Section 18A(8) states that interest shall be calculated in the manner laid down in sub-Section (6). Sub-Section (6) provides for interest on the shortfall between 80% of the tax determined on regular assessment and the tax paid, calculated from January 1st of the financial year in which tax was paid. Since the assessee paid no tax, this calculation is impossible. Revenue's Contention: The High Court upheld the charge of interest, implying that the machinery provisions for calculating interest should be interpreted to make the legislative intent effective, even if the assessee did not comply with the initial requirements.

Which sections of the Income-tax Act were involved?

Section 18A,Section 18A(1),Section 18A(2),Section 18A(3),Section 18A(6),Section 18A(8),Section 18A(9),Section 28

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3 S.C.R. SUPREME COURT REPORTS 893 to file their written statements and then appropriate issues should be framed and the suits tried and disposed of in the light of the findings on those Issues in accordance with law.

Under the unusual circumstances in which the litigation has thus secu- red a further lease of life, we dire1Jt that the costs incurred so far should be borne by the parties.

Appeal allowed.

Oases remitted GURSAHAI SAIGAL v. COMMISSIONER OF INCOME-TAX, PUNJAB (J. L. KAPUR, A.'_K. SARKAR and M. HIDAYATULLAH, JJ.)

Income Tax-Advance payment-Oonstruction of enact- meut-Rule-Penaltg in addition to liability-Indian Income· tax Act, 1922 (II of 1922), a.ISA, Sub-sa.(2),(3),(6),(8),(9).

By Sub-s.(8) of s.ISA. "where on making the regular assesment, the Income-tax Officer finds that no payment of the tax has been made in accordance with the foregoing provisions of this section, interest calculated in the manner laid down in sub-section ( 6) shall be added to the tax as determined on the basis of the regular assessment". Sub. section (6l of s.18A provided, "where in any year an assessee has paid tax under .. sub-section(3) on the basis of his own esti

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