RANIWALA JEWELLERS PRIVATE LIMITED,JAIPUR vs. ACIT/DCIT CIR-6,JPR, JAIPUR

3. We have gone through the intimation issued u/s. 143(1) of the Act along with the appeal order of the Ld. Addl. /JCIT (A) - 6, Mumbai. It is observed that the report of the Chartered Accountant as prescribed in section 80JJA of the Act r.w.r. 19AB of the Rules was uploaded in form no. 10DA on 17.10.2023, but the same was verified digitally on 21.12.2023 and the ITR itself was filed on 31.10.2023. The only issue in this matter was whether this delay in verification of Form No. 10DA, which is otherwise uploaded well in time can be made basis for disallowance, on procedural ground, or not. It is observed that the Ld. Addl./JCIT (A) - 6, Mumbairelied upon the ratio laid down by the Hon’ble Apex Court in the case of [2022] 140 taxmann.com 223 (SC)Principal Commissioner of Income-taxvs.Wipro Ltd.and [2018] 95 taxmann.com 327 (SC)Commissioner of Customs (Import), Mumbaivs.Dilip Kumar & Company while dismissing the claim of the Assessee. In Wipro Ltd. The Hon’ble Apex Court has held as under:

In the instant case, the High Court as well as the Tribunal have observed and held that for claiming the exemption relief under section 10B(8) furnishing the declaration to the Assessing Officer is mandatory but furnishing the same before the due date of filing the original return of income is directory. In the instant case, when the assessee submitted its original return of income under section 139(1) on 31-10-2001, which was the due date for filing of the original return of income, the assessee specifically and clearly stated that it is a company and is a 100 per cent export-oriented unit and entitled to claim exemption under section 10B and therefore, no loss is being carried forward. Along with the original return filed on 31-10-2001, the assessee also annexed a note to the computation of income. However, thereafter the assessee filed the revised return of income under section 139(5) on 23-12-2002 and filed a declaration under section 10B(8) which admittedly was after the due date of filing of the original return under section 139(1), i.e.,31-10-2001. [Para 6] On a plain reading of section 10B(8) as it is, i.e., 'where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of section 10B may not be made applicable to him, the provisions of section 10B shall not apply to him for any of the relevant assessment years', it is noted that the wording of the section 10B(8) is very clear and unambiguous. For claiming the benefit under section 10B(8), the twin conditions of furnishing the declaration to the Assessing Officer in writing and that the same must be furnished before the due date of filing the return of income under sub-section (1) of section 139 required to be fulfilled and/or satisfied. Both the conditions are mandatory to be satisfied. It cannot be said that one of the conditions would be mandatory and the other would-be directory, where the words used for furnishing the declaration to the Assessing Officer and to be furnished before the due date of filing the original return of income under sub- section (1) of section 139 are same/similar. It cannot be disputed that in a taxing statute the provisions are to be read as they are and they are to be literally construed, more particularly in a case of exemption sought by an assessee. [Para 8] In such a situation, filing a revised return under section 139(5) claiming carrying forward of losses subsequently would not help the assessee. In the instant case, the assessee filed its original return under section 139(1) and not under section 139(3). Therefore, the revenue is right in submitting that the revised return filed by the assessee under section 139(5) can only substitute its original return under section 139(1) and cannot transform it into a return under section 139(3), in order to avail the benefit of carrying forward or set-off of any loss under section 80. The assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return of income, under section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carried forward or set-off of any loss. Filing a revised return under section 139(5) and taking a contrary stand and/or claiming the exemption, which was specifically not claimed earlier while filing the original return of income is not permissible. By filing the revised return of income, the assessee cannot be permitted to substitute the original return of income filed under section 139(1). Therefore, claiming benefit under section 10B(8) and furnishing the declaration as required under section 10B(8) in the revised return of income which was much after the due date of filing the original return of income under section 139(1), cannot mean that the assessee has complied with the condition of furnishing the declaration before the due date of filing the original return of income under section 139(1). As observed hereinabove, for claiming the benefit under section 10B(8), both the conditions of furnishing the declaration and to file the same before the due date of filing the original return of income are mandatory in nature. [Para 9] The High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under section 10B(8) is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in section 10B(8). It is held that for claiming the benefit under section 10B(8), the twin conditions of furnishing a declaration before the Assessing Officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is answered in favour of the revenue and against the assessee. The orders passed by the High Court as well as Tribunal taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under section 10B(8) on non-compliance of the twin conditions as provided under section 10B(8). [Para 14] Our observation:The citation relied upon by the Revenue is distinguishable in facts. The matter in Wipro Ltd. is altogether different on following grounds as under: i). Wipro Ltd. deals with the exemption matter which is being covered by section 10B (8) of the Act falling in chapter III, whereas in the present matter the assessee is claiming deduction u/s. 80JJA of the Act falling in chapter VI-A; ii). In Wipro’s case the assessee put forward its claim in the revised return alongwith certain adjustments w.r.t. losses to be set-off and carried forward, whereas in this case there is no matter of revised return and any sort of tax planning/after thought of setting off of losses/carried forward of loss etc.; Again, in the case Dilip Kumar & Company the Hon’ble Apex Court held as under:

There cannot be any doubt that the ratio in Sun Export Corporation's Case (supra) that, if two views are possible in interpreting the exemption notification, the one favourable to the assessee in the matter of taxation has to be preferred. This principle created confusion and resulted in unsatisfactory state of law. In spite of catena of judgments which took the contra view, holding that an exemption notification must be strictly construed, and if a person claiming exemption does not fall strictly within the description of the notification otherwise then he cannot claim exemption. [Para 10] About three years after Sun Export Corporation's Case (supra), in the year 2000, this Court in CC & CE v. Surendra Cotton Mills & Fert. Co. 2001 taxmann.com 807, expressed reservations as to the soundness of the dicta in Sun Export Corporation's Case (supra), observing that Sun Export Corporation's Case (supra) ignored catena of judgments of this Court expressing contra view. This Court prima facie came to the conclusion with regard to the principle that when two views are possible, one favourable to the assessee in matters of taxation has to be preferred, is unexceptionable when interpreting the charging section of a taxation statute, but the opposite principle would be applicable in interpretation of exemption notification. The three Judge Bench in the referral order further observed that the views expressed in Sun Export Corporation's Case (supra) with regard to interpretation of exemption notification to support the conclusion, required reconsideration. [Para 11] Here itself, it is to be noticed that the distinction in interpreting a taxing provision (charging provision) and in the matter of interpretation of exemption notification is too obvious to require any elaboration. Nonetheless, in a nutshell, it is observed in Surendra Cotton Mills's Fert. Co.'s Case (supra), that in the matter of interpretation of charging section of a taxation statute, strict rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section, the one favourable to the assessee need to be applied. There is, however, confusion in the matter of interpretation of exemption notification published under taxation statutes and in this area also, the decisions are galore. [Para 12] An Act of Parliament/Legislature cannot foresee all types of situations and all types of consequences. It is for the Court to see whether a particular case falls within the broad principles of law enacted by the Legislature. Here, the principles of interpretation of statutes come in handy. In spite of the fact that experts in the field assist in drafting the Acts and Rules, there are many occasions where the language used and the phrases employed in the statute are not perfect. Therefore, Judges and Courts need to interpret the words. [Para 14] In doing so, the principles of interpretation have been evolved in common law. It has also been the practice for the appropriate legislative body to enact Interpretation Acts or General Clauses Act. In all the Acts and Regulations, made either by the Parliament or Legislature, the words and phrases as defined in the General Clauses Act and the principles of interpretation laid down in General Clauses Act are to be necessarily kept in view. If while interpreting a Statutory law, any doubt arises as to the meaning to be assigned to a word or a phrase or a clause used in an enactment and such word, phrase or clause is not specifically defined, it is legitimate and indeed mandatory to fall back on General Clauses Act. Notwithstanding this, it needs to be remembered that when there is repugnancy or conflict as to the subject or context between the General Clauses Act and a statutory provision which falls for interpretation, the Court must necessarily refer to the provisions of statute. [Para 15] The purpose of interpretation is essentially to know the intention of the Legislature. Whether the Legislature intended to apply the law in a given case; whether the Legislature intended to exclude operation of law in a given case; whether Legislature intended to give discretion to enforcing authority or to adjudicating agency to apply the law, are essentially questions to which answers can be sought only by knowing the intention of the legislation. Apart from the general principles of interpretation of statutes, there are certain internal aids and external aids which are tools for interpreting the statutes. [Para 16] The long title, the preamble, the heading, the marginal note, punctuation, illustrations, definitions or dictionary clause, a proviso to a section, explanation, examples, a schedule to the Act etc., are internal aids to construction. The external aids to construction are Parliamentary debates, history leading to the legislation, other statutes which have a bearing, dictionaries, thesaurus. [Para 17] t is well accepted that a statute must be construed according to the intention of the Legislature and the Courts should act upon the true intention of the legislation while applying law and while interpreting law. If a statutory provision is open to more than one meaning, the Court has to choose the interpretation which represents the intention of the Legislature. [Para 18] The well settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. [Para 19] In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose. Not only that, if the plain construction leads to anomaly and absurdity, the court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation. [Para 20] n construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocents might become victims of discretionary decision making. Insofar as taxation statutes are concerned, article 265 of the Constitution prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the Legislature. [Para 21] At the outset, the position of 'plain meaning rule or clear and unambiguous rule' with respect of tax law needs to be clarified. 'The plain meaning rule' suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase 'cum inverbisnullaambiguitasest, non-debetadmittivoluntatis quaestio'. Following such maxim, the courts sometimes have made strict interpretation subordinate to the plain meaning rule, though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory. [Para 22] Next, the meaning and scope of 'strict interpretation', as evolved in Indian law and how the higher Courts have made a distinction while interpreting a taxation statute on one hand and tax exemption notification on the other needs to be considered. [Para 23] As contended by the revenue, the principle of literal interpretation and the principle of strict interpretation are sometimes used interchangeably. This principle, however, may not be sustainable in all contexts and situations. There is certainly scope to sustain an argument that all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation. That strict interpretation does not encompass strict literalism into its fold. It may be relevant to note that simply juxtaposing 'strict interpretation' with 'literal rule' would result in ignoring an important aspect that is 'apparent legislative intent'. The fact is that there may be overlapping in some cases between the aforesaid two rules. With certainty, it is observed that, 'strict interpretation' does not encompass such literalism, which leads to absurdity and goes against the legislative intent. As noted above, if literalism is at the far end of the spectrum, wherein it accepts no implications or inferences, then 'strict interpretation' can be implied to accept some form of essential inferences which literal rule may not accept. [Para 24] The literal rule de hors the strict interpretation is not being suggested, nor one should ignore to ascertain the interplay between 'strict interpretation' and 'literal interpretation'. It needs to be reiterated that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute. [Para 25] Even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements. This, however, did not in any manner tinker with the view that an ambiguous exemption clause should be interpreted favouring the revenue. Here again different tests were applied when considering the ambiguity of the exemption notification which requires strict construction and after doing so at the stage of applying the notification, it came to the conclusion that one has to consider liberally. [Para 27] With the above understanding the stage is now set to consider the core issue. In the event of ambiguity in an exemption notification, should the benefit of such ambiguity go to the subject/assessee or should such ambiguity should be construed in favour of the revenue, denying the benefit of exemption to the subject/assessee? There is catena of case laws in this area of interpretation of an exemption notification, which need to be considered. The case of Commissioner of Inland Revenue v. James Forrest [1890] 15 AC 334 (HL) is a case which does not discuss the interpretative test to be applied to exemption clauses in a taxation statute - however, it was observed that 'it would be unreasonable to suppose that an exemption was wide as practicable to make the tax inoperative, that it cannot be assumed to have been in the mind of the Legislature' and that exemption 'from taxation to some extent increased the burden on other members of the community'. Though this is a dissenting view of Lord Halsbury, LC, in subsequent decisions this has been quoted vividly to support the conclusion that any vagueness in the exemption clauses must go to the benefit of the revenue. Be that as it is, in our country, at least from 1955, there appears to be a consistent view that if the words in a taxing statute (not exemption clause) are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and it does not matter if the taxpayer escapes the tax net on account of Legislatures' failure to express itself clearly. [Para 28] On consideration of various authorities, it is observed that, it is true to say that there exists unsatisfactory state of law in relation to interpretation of exemption clauses. Various Benches which decided the question of interpretation of taxing statute on one hand and exemption notification on the other, have broadly assumed that the position is well settled in the interpretation of a taxing statute: It is the law that any ambiguity in a taxing statute should ensure to the benefit of the subject/assessee, but any ambiguity in the exemption clause of exemption notification must be conferred in favour of revenue - and such exemption should be allowed to be availed only to those subjects/assessee who demonstrate that a case for exemption squarely falls within the parameters enumerated in the notification and that the claimants satisfy all the conditions precedent for availing exemption. Presumably for this reason the Bench which decided Surendra Cotton Mills & Fert. Co.'s Case (supra) observed that there exists unsatisfactory state of law and the Bench which referred the matter initially, seriously doubted the conclusion in Sun Export Corporation's Case (supra) that the ambiguity in an exemption notification should be interpreted in favour of the assessee. [Para 40] After thoroughly examining the various precedents and after considering same, it is to be justifiably concluded and held that every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the revenue/State. [Para 41] In Govind Saran Ganga Saran v. Commissioner of Sales Tax 1985 Supp (SCC) 205, this Court pointed out three components of a taxing statute, namely subject of the tax; person liable to pay tax; and the rate at which the tax is to be levied. If there is any ambiguity in understanding any of the components, no tax can be levied till the ambiguity or defect is removed by the legislature. [Para 42] There is abundant jurisprudential justification for this. In the governance of rule of law by a written Constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject/assessee may warrant visualizing different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language of the law. There cannot be any implied concept either in identifying the subject of the tax or person liable to pay tax. That is why it is often said that subject is not to be taxed, unless the words of the statute unambiguously impose a tax on him, that one has to look merely at the words clearly stated and that there is no room for any intendment nor presumption as to tax. It is only the letter of the law and not the spirit of the law to guide the interpreter to decide the liability to tax ignoring any amount of hardship and eschewing equity in taxation. Thus, it is to be reiterated that in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee. But, in a situation where the tax exemption has to be interpreted, the benefit of doubt should go in favour of the revenue, the aforesaid conclusions are expounded only as a prelude to better understand jurisprudential basis for the conclusion. [Para 43] The instant case concerns a situation where there is ambiguity in an exemption notification or exemption clause, in which event the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principle that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. Both the situations are different and while considering an exemption notification, the distinction cannot be ignored. [Para 51]

To sum-up, the reference is being answered by holding as under:

(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.

(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue.

(3) The ratio in Sun Export Corporation's Case (supra) is not correct and all the decisions which took similar view as in Sun Export Corporation's Case (supra) stands overruled. [Para 52] Our observation: As regards, in the above pronouncement of the Hon’ble Apex Court, it is observed that the same is not applicable on the facts of the case and the same is distinguishable as under: i). The above citation is dealing with the notification/circular issued by the Board, whereas the issue before us is about applicability of a section, incorporated in the statute by the Parliament; ii). The above citation deals with the exemption criteria and not dealing with any procedure to be undertaken, whereas in this case, dispute is w.r.t. procedure and not the entitlement of the assesses.

The duty of the Court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognised by this Court in several of its decisions. Hence, all that the court has to see is, what is the true effect of the language employed in section 271(1)(a) (i). If court finds that language to be ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty. It must first determine what is the meaning of the expression 'the amount of the tax, if any, payable by him' in section 271(1)(a) (i). Does it mean the amount of tax assessed under section 143 or the amount of tax payable under section 156. The word 'assessed' is a term often used in taxation law. It is used in several provisions in the Act. Quantification of the tax payable is always referred to in the Act as a tax 'assessed'. A tax payable is not the same thing as tax assessed. The tax payable is that amount for which a demand notice is issued under section 156. In determining the tax payable, the tax already paid has to be deducted. Hence, there can be no doubt that the expression 'the amount of the tax, if any, payable by him' referred to in the first part of section 271(1)(a) (i) refers to the tax payable under a demand notice. Next the question is, what is the meaning to be attached to the words 'the tax' found in the latter part of that provision. It may be noted that the expression used is not 'tax' but 'the tax'. The definite article 'the' must have reference to something said earlier. It can only refer to the tax, if any, payable by the assessee mentioned in the first part of section 271(1)(a) (i).

Therefore, in calculating the penalty leviable under section 271(1)(a )(i), the amount paid by the assessee under the provisional assessment under section 23B of the 1922 Act, was to be deducted from the amount of tax determined under section 23(2) of that Act in order to determine the amount of tax on which the computation of the penalty was to be based and in reducing the amount of the penalty imposed on the assessee.

The Order is pronounced in the open court on the 6th Day of May 2025.