COMMISSIONER OF INCOME-TAX, DELHI vs. S. TEJA SINGH

CIVIL APPEAL No. 122/1957Supreme Court1958 INSC 9505 November 1958Bench: 3 JudgesAuthor: T.L. VENKATARAMA AIYYAR, P.B. GAJENDRAGADKAR, A.K. SARKAR11 pages
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What did the Supreme Court hold?

The Supreme Court held that it was competent for the Income-tax authorities to impose a penalty under Section 28 read with Section 18A(9)(b) for failure to comply with Section 18A(3). The Court reasoned that Section 18A(9)(b) contains a legal fiction, stating that an assessee who has failed to comply with Section 18A(3) "shall be deemed... to have failed to furnish the return of his total income and the provisions of section 28, so far as may be, shall apply accordingly". The Court interpreted this fiction to mean that the failure to send an estimate under Section 18A(3) should be treated as a failure to furnish a return of income under Section 22. This interpretation was reinforced by the principle of statutory construction that a statute is designed to be workable, and an interpretation that renders a provision nugatory should be avoided. The Court set aside the order of the High Court and answered the reference in the affirmative, allowing the appeal. The operative direction was to set aside the High Court's order and uphold the penalty.

What were the facts?

The assessee, S. Teja Singh, who had not been assessed to income-tax prior to the assessment year 1948-49, filed suo motu returns on July 4, 1949, for assessment years 1948-49 and 1949-50, showing incomes of Rs. 4,494 and Rs. 31,646 respectively. He failed to submit an estimate of tax payable as required by Section 18A(3) of the Indian Income-tax Act, 1922. The Income-tax Officer initiated proceedings under Section 28 read with Section 18A(9) and imposed penalties of Rs. 40 for 1948-49 and Rs. 1,000 for 1949-50. The Appellate Assistant Commissioner confirmed the penalty for 1948-49 but set aside the penalty for 1949-50, considering the assessee no longer a 'new assessee'. The Income-tax Appellate Tribunal disagreed with the Appellate Assistant Commissioner regarding the 'new assessee' status and held the penalty order ultra vires, stating Section 28 applied only to failures to furnish returns under Section 22 or 34, not estimates under Section 18A(3). The High Court agreed with the Tribunal.

What were the issues?

1. Whether the Income-tax Officer was competent to levy a penalty under Section 28 read with Section 18A(9) of the Indian Income-tax Act, 1922, for the assessee's failure to send an estimate of tax payable as required by Section 18A(3), when the assessee had not been previously assessed. Assessee's contention (as per Tribunal and High Court): The penalty order was ultra vires because Section 28, which deals with penalties, applies only when a person fails to furnish a return when required by a notice under Section 22 or Section 34. There can be no such notices with reference to estimates of tax to be sent under Section 18A(3). Therefore, the failure to send an estimate under Section 18A(3) does not fall within the ambit of Section 28. Revenue's contention (implied from the appeal): The revenue likely contended that Section 18A(9)(b) creates a legal fiction, deeming the failure to comply with Section 18A(3) as a failure to furnish a return of total income, thereby making Section 28 applicable.

Which sections of the Income-tax Act were involved?

Section 18A(3),Section 18A(9),Section 28,Section 22,Section 34

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Cause title — parties, addresses and appearances
394 SUPREME COURT REPORTS [1959] Supp. r95B his administrative capacity. It follows from this con- clusion that all considerations flowing from the basic Gullapalli idea of the proceedings before the State Government Nageswara Rao d l h h JI f and 011.,,. being of a quasi-ju icia c aracter, are w o y out o v. the way. ·It must, therefore,' be held tha~ the order of Andhra' Prade<h the State ·Government, impugned in this. case, is not State Road Trans- open to any interference by the courtR. I would, there- port Corporation fore, dismiss the petition with costs. and Another · Sinha ]. November 5.

In view of the opinion of the majority the order ap- proving the scheme is hereby quashed and a direction issued to the 'first respondent to forbear from taking over any of the routes in which the petitioners are engaged in transport business. This will not preclude the State Government from making the necessary en- quiry in regard to the objections filed by the petition- ers in accordance with law.

The petitioners will have liberty to file additional objections, if any. The parties to bear their own costs. COMMISSIONER OF INCOME-TAX, DELHI v. S. TEJA

The order continues below.

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