Strict construction of penalty law barred estimate-filing default where tax liability had not yet arisen

A penal provision was construed strictly, and the court held that no enforceable liability existed on the relevant date to require the firm to furnish an estimate of tax under Section 18A(3). Although the due date fell on 15 March 1947, the firm was then unregistered and the later registered assessee, or its partners in that assessed capacity, had not yet come into existence for that purpose. As liability to pay tax arose only upon later registration and assessment, failure to file the estimate could not attract penalty under Section 28(1)(a).

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Issues: Whether, on the facts found, the assessee firm was bound to furnish an estimate of tax payable before 15 March 1947 and whether failure to do so attracted penalty under the Act.

Analysis: The due date under Section 18A(3) fell on 15 March 1947, when the firm was still unregistered and the later registered entity, or its partners as such, was not yet in existence in the form ultimately assessed. Under Section 23(5), the registered firm was not itself the liable assessee in the ordinary sense, and the liability to pay tax ultimately arose only upon registration and assessment of the partners. Section 28(1)(a), being penal in nature, had to be construed strictly, and on the date of the alleged default there was no enforceable liability against the registered firm or its partners to furnish the estimate.

Conclusion: The assessee was not liable to furnish the estimate under Section 18A(3), and the penalty could not be sustained. The question was answered in the negative and in favour of the assessee.

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