AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1958 (11) TMI 2
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....s. We are concerned in these proceedings with the vires of an order, which the Income-tax Officer made on October 9, 1950, under section 28 read with sections 18A(3) and 18A(9) of the Act. It will be convenient to set out these provisions, so far as they are material for the purpose of this appeal. Section 18A(3) provides that : "Any person who has not hitherto been assessed shall, before the 15th day of March in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed six thousand rupees, send to the Income-tax Officer an estimate of the tax payable by him on that part of his income to which the provisions of section 18 do not apply of the said previous year calculated in the manner laid down in sub-section (1), and shall pay the amount, on such of the dates specified in that sub-section as have not expired, by instalments which may be revised according to the proviso to sub-section (2)." Section 18A(9) is as follows : " If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment, is satisfied that any assessee --- (a) has fur....
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.... the ground that by reason of the assessment for the year 1948-49 the respondent ceased to be a new assessee for 1949-50, and that, in consequence, section 18A(3) had no application. Against the order cancelling the penalty for 1949-50, the Income-tax Officer preferred an appeal to the Appellate Tribunal, which disagreed with the view of the Appellate Assistant Commissioner that the respondent was no longer a new assessee within section 18A(3) of the Act, but held that the order of the Income-tax Officer imposing a penalty under section 28 was ultra vires, because that section would, in terms, apply only when a person failed to furnish the return when he was required so to do by notice under section 22 or section 34 of the Act and that there could be no such notices with reference to estimates of tax on income to be sent under section 18A(3). In the result, the appeal was dismissed. On the application of the appellant, the Tribunal referred the following question for the opinion of the High Court : " Whether on a true construction of section 18A(9)(b) read with section 28 of the Indian Income-tax Act, 1922, a penalty may be imposed for a total failure to comply with the provision....
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....erson who fails to send an estimate under section 18A(3) cannot be said to have failed to furnish the return of his total income which he was required to furnish in response to a notice issued under section 22 or section 34 ; secondly, the said person cannot be said to have failed to furnish it within the time allowed and in the manner required by such notice, for estimates under section 18A(3) must be furnished before the 15th March in the financial year immediately preceding the year of assessment whereas the returns required by the notices under sections 22 and 34 can be furnished at later dates." With respect, the error in this reasoning lies in this that it fails to give due effect to the fiction contained in section 18A(9)(b) of the Act. Under that provision, when an assessee has failed to comply with section 18A(3) he "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." In other words, by a legal fiction the failure to send an estimate of the tax under section 18A(3) is treated as a failure to furnish return of income under section 22. It is a necessary implication of this fi....
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....mate in accordance with section 18A(3) is to be deemed to be a failure to make a return. Now, there can be no failure to make a return, unless notice had been issued under section 22(1) or section 22(2) and there has been a default in complying with that notice. Therefore, the fiction that the failure to send an estimate is to be deemed to be a failure to send a return necessarily involves the fiction that notice had been issued under section 22, and that had not been complied with. It is a rule of interpretation well settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate. The following oft-quoted observations of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council may appropriately be referred to : " If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute....
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....But can that be said of section 18A(9)(b) ? Its object avowedly is to assimilate the position of a person who has failed to send the estimate under section 18A(3) to that of a person who has failed to furnish the return under section 22, and that object is sought to be achieved by enacting the fiction which is contained in section 18A(9)(b). And if, on the principles laid down in East End Dwellings Co. Ltd. v. Finsbury Borough Council, the true effect of that fiction is that it imports that notice had been issued under section 22, then the conditions prescribed in section 28 of the Act are satisfied and penalty could be imposed under that section for failure to comply with section 18A(3), on the clear language of that enactment itself without straining or overstretching it. We must now refer to an aspect of the question, which strongly reinforces the conclusion stated above. On the construction contended for by the respondent, section 18A(9)(b) would become wholly nugatory, as sections 22(1) and 22(2) can have no application to advance estimates to be furnished under section 18A(3), and if we accede to this contention, we must hold that though the Legislature enacted section 18A(....