Statutory deeming fiction extends penalty machinery where default is treated as failure to furnish a return.

A statutory deeming provision that treated failure to send an estimate under section 18A(3) as failure to furnish a return of total income also attracted the penalty machinery under section 28. The court reasoned that the deeming fiction must be given full effect, including the statutory notice framework necessary for the substituted default to operate, so the conditions for penalty were satisfied. A narrow construction that excluded penalty would have deprived section 18A(9)(b) of practical effect and undermined its legislative purpose. Strict construction of fiscal statutes did not displace the clear language and object of the provision.

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Issues: Whether a penalty could be imposed under section 28 read with section 18A(9)(b) of the Indian Income-tax Act, 1922 for total failure to comply with section 18A(3).

Analysis: Section 18A(9)(b) deems a failure to send an estimate under section 18A(3) to be a failure to furnish the return of total income, and further provides that section 28 shall apply accordingly. The deeming provision was held to carry with it the necessary incidents of the substituted situation, including the assumption of the statutory notice machinery under section 22, so that the conditions for action under section 28 are satisfied. The construction urged against penalty would deprive section 18A(9)(b) of practical effect and defeat the legislative purpose of bringing such default within the penalty provision. The rule of strict construction of fiscal statutes did not assist where the language and object of the provision were clear.

Conclusion: Penalty was competent under section 28 read with section 18A(9)(b) for failure to comply with section 18A(3), and the answer was in the affirmative.

Ratio Decidendi: A statutory deeming provision must be given full effect by assuming all facts and consequences necessary for its operation, and where it deems a default to be a failure to furnish a return, the penalty machinery applicable to such failure applies accordingly.

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