' AJMAL MIAN, J.-(a) In the instant Full Bench reference the controversy which is sought to be resolved is as to the construction of section 45-A (hereinafter referred to as the section) of the Income-tax Act, 1922 (hereinafter referred to as the Act) enacted by Act XVI of 1963 (which was enforced with effect from 1-7-1963 and was subsequently amended by Act XI of 1966). To put it precisely, the question in issue is, whether the section can be pressed into service in respect of non-payment of the tax which had become due and payable under an assessment order passed and a demand notice issued under section 29 of the Act prior to 1-7-1963. In order to resolve the above controversy, it may be advantageous to reproduce the section in extenso as it stood originally under Act XVI of 1963 and as amended by Act XI of 1966, which read as follows :- "45-A. (Under Act of XVI of 1963).-Where any assessee fails to pay the tax due from him, he shall without prejudice to his liability under any other provisions of law, be liable to pay an additional amount of tax equal to six per cent per annum of the amount of tax due from him from the date on or before which it was originally made payable (hereafter referred to as the said date) to date of its payment : ' Provided that where at the request of the assessee, the tax is allowed to be paid in instalments, such additional amount of tax shall be payable in respect of each instalment from the said date to the date on which it is paid."
"45-A. (As amended by Act XI of 1966) Additional tax for delayed payments.--Where any assessee-
(a) fails to pay the tax due f; om him, or
(b) has paid tax under section 22-A and the tax so paid is less than 80 per cent of the tax payable as a result of completion of the relevant assessment under section 23, he shall, without prejudice to his liabi lily under any other provision of law, pay an additional amount o tax equal to eight per cent, per annum of- (i)in cases referred to in clause (a), the amount of tax due from hi from the date on or before whi'lt it was originally made payabl (hereafter in this section referred to as the said date) to the dat of its payment :
(ii) in cases referred to in clause (b), the amount by which the tax pal under section 22-A falls short of 80 per cent of tax payabl under section, 23, from the date of payment of the tax under sectio 22- A to the date of completion of the assessment under section 23 : ' Provided that where at the request of the assessee, the tax is allowe to be paid in instalments, such additional amount of tax shall b payable in respect of each instalment from the said date to the dat on which it is paid : ' Provided further that where, upon an appeal under section 33, o revision under section 33-A, or a reference to the High Court unde section 66, or an appeal to the Supreme Court under section 66- A, the amount on which tax was payable under this section is reduced, the additional amount of tax shall be reduced accordingly and the additional amount paid in excess, if any shall be refunded together with the amount of tax that is refundable."
(b) It may be observed that I have underlined* the words in the unamended and amended section quoted hereinabove which have direct bearing to the point in issue. It may be noticed that the same are identical except that the rate of additional tax has been substitututed by eight per cent in place of six per cent in the amended section. The above underlined* words provide that where any assessee fails to pay the tax due from him, he shall without prejudice to his liability under any other provision of law, pay additional amount of tax equal to eight per cent per annum of the amount of tax due from him from the date on or before which it was originally made payable to the date of payment.
' It may be pertinent to point out that there is no express provision in the section providing that the same shall be applicable retrospectively as was provided for example while enacting subsection (4-AA) to section 15-BB of the Act by Finance Ordinance, 1972 and while amending some other provisions of the Act.
2. (a) It has therefore, been contended by Mr. Ali Athar, learned counsel for the applicant that since there is no express provision in the section to make it applicable retrospectively, the additional tax cannot be levied in respect of the tax, which had become due and payable prior to 1-7-1963.
(b) On the other hand, it was urged by Mr. Waheed Farooqui, learned counsel for the respondent that the section is applicable w. e. f. 1-7-1963 even n respect of the tax, which had become due and payable under the assessm ent orders passed prior to 1-7-1963.
3. There is not much case-law on the construction of the section. However, the following cases have been referred to by the learned counsel for the parties
(i) M. Shakeel Saigal v. Income-tax Officer Companies (etc.) PLD 1976 Lab. 616, in which inter alia it was held by a Division Bench of the Lahore High Court that the additional tax provided for in section 45-A is in the nature of interest or penalty. But the question, whether the above provision is applicable prospectively or retrospectively was not involved.
(ii) Taimur Shah v. Commissioner of Income-tax PLD 1976 Kar.
1030. In the above case the facts were that the applicant assessee's assessment for the charge year 1958-59 (supplementary) was finalized on 31-12-1964, whereas his assessments for the charge years 1939-60, 1960-61 were finalized some time in the year 1965. The demand notice for the charge year 1958-59 was issued on 9-1-1965, whereas demand notices for the other two years were served on the assessee on 4-7-1965 and 20-7 1965 respectively. The applicant assessee had failed to pay the tax even after the service of the above notices, the Income-tax Officer by separate orders passed in September, 1965 imposed additional tax on the assessee for each of the 3 charge years in question. The assessee challenged the above levy of the additional tax through an Income-tax Reference to this Court under section 66 (1) of the Act. It was urged by the learned counsel for the applicant assessee that the additional tax could not have imposed as the charge years in respect of which the additional tax was imposed, were years prior to the enactment of section 45-A. On the other hand it was urged by the learned counsel appearing for the respondent department that if the tax due remained unpaid notwithstanding that an assessment order might have been passed and a demand notice might have been issued under section 29 of the Act prior to 1-7-1963, the assessee was liable to pay additional tax. A Division Bench of this Court while dealing with the above contentions observed as follows :- "The provisions of the aforesaid section come into play only when an assessee fails to pay the tax due from him. It is, therefore, to be seen when a tax is due from a person leaving aside the deduction of tax at source under section 18 or the payment of advance tax under section 18-A, neither of which provisions are applicable in the instant case, tax is to be determined and assessed under the provisions of section 23 of the Act, mainly, on the basis of the returns of income to be made under section 22. On such assessment being made, the tax becomes due and a notice of demand is to be issued under section 29 of the Act specifying the sum due and payable. The amount specified in the notice of demand is required to be paid within the time specified in the notice, as provided in section 45. An assessee thus would be deemed to have failed to pay the tax due from him if he fails to pay the tax by the date specified in the notice of demand issued under section 29. In the instant case, as already pointed out, the three notices of demand for the three charge years in question were all issued in September, 1965 much after section 45-A had been added to the Income-tax Act. As such the assessee's failure to pay the tax due from him occurred after section 45-A had become a part of the Income-tax Act. No question, therefore, of retrospective operation of section 45-A arises in the instant case.
' Mr. S. A. Nusrat, the learned counsel for the Revenue, also attempted to argue that the words 'fails to pay the tax due from him' included tax due for the past years and, therefore, in a sense section 45-A is retrospective in its operation .
' We have, however, pointed out that under the scheme of the Income-tax Act the assessee became liable to pay the tax due from him for the three charge years in question when his assessm ent for those years was made notice of demand was issued to him. These actions were taken much after section 45-A became a part of the Income-tax Act, We would, therefore repeat that the liability of the assessee for the additional tax arose after the addition of section 45- A and the question of giving retrospective operation to section 45-A does not really arise in the instant case."
(iii) Mian Hameed Ahmad (of Premier Cloth Mills Ltd. Lahore V. Income Tax ufficer (Investigation II), Lahore PLD 1977 LA.
1168. By the above-reported judgment 4 writ petitions filed for challenging the levy of the additional tax under section 45-A on the arrears of Income-tax due from the petiioners for the assessment years 1949 to 1963 for the period commencing from 1-7-1963 expiring on 30-6-1964 were allowed by a learned Single Judge of the Lahore High Court, Shafiur Rahman, J. (as he then was). It may be advantageous to reproduce paras. 5 and 6 of the above judgment, which read as follows :- "5. An examination of section 45-A of the Income-tax Act, makes it clear that it provides the date from which, the date upto which, and the rate at which the additional tax is to be levied and realised. There is, therefore, no scope either for Department or for this Court to depart from such a manifest legislative intent as is found in the express words. The rate of additional tax and the date upto which it was leviable are not in dispute in the present case because they have been correctly determined and applied. However, the dispute is with regard to the date from which such additional tax was to be computed. The date prescribed in the law is 'from the date on or before which it was originally made payable.' In all cases in hand it is admitted that the date so prescribed by the Department for the payment of the dues as old as of 1949-50 or of 1951-52 was prior to 1-7- 1963. If the Department or the respondents were to follow the letter of the law they had no choice in the matter to adopt 1-7-1963 which is the date of enforcement of the Act as the date from which the additional tax would be leviable. The logically consistent stand would have been to levy the additional tax from the date on or before which the tax was originally made payable or in case it amounted to giving a retrospective effect to the provision to apply it to a case where such a date fell after 1-7-1963 and not on any earlier date.
6. It is not the case of the Department that they are well within their right to demand the additional tax from a date earlier than 1-7-1963 and this would appear to be the correct legal view in interpreting and applying provisions of a fiscal statute imposing a penalty. The Legislature's intention to give it retrospective effect being not manifest, it has to be applied prospectively to the demands created after the provision was enacted. The Legislature having specified the date from which the rate at which and the date upto which such an additional tax would be leviable has left no choice for anyone ; not even for the Department to substitute a date of its own liking, i,e, 1-7- 1963. This would amount to reading words in the statute which are not there. In the circumstances, these petitions are allowed with costs and the application of section 45-A to demands already finalised and made payable before 1-7-1963 is held to be without lawful authority and of no legal effect."
(iv) The Commissioner of Income-tax, Karachi v. Nisar Ahmed 1984 PTD 189, in which the question before a Division Bench of this Court was, whether the additional tax under section 45-A of the Act could be levied for the assessm ent year 1954-55, of which the assessment order was made on 30th June, 1959. It was held that the view taken by the Tribunal that the above additional tax could not have been levied was correct. It was further held that section 45-A when introduced by Finance Acts, 1963 and 1966 did not make its operation with retrospective effect and that a penal .Provision cannot be made applicable retrospectively unless this is so provided by statute itself. It may be pointed out that in the above case, the learned counsel for the department conceded the above legal proposition.
4. It may be pointed out that the ratio of the Taimur Shah's case decided by a Division Bench of this Court, referred to hereinabove in para 3 (ii) seems to be that if an assessment order and a demand notice thereof was issued subsequent to 1-7-1963, the section for levying additional tax could be pressed into service irrespective of the fact that the charge year was of prior to the above date. But in the judgment there is no discussion as to the effect of the use of the words "from the date on or before which it was originally made payable" employed in the section.
' Whereas in the above case of Mian Hameed Ahmed the learned Single Judge of the Lahore High Court had taken notice of the use of the above words but concluded that the section was not applicable to the cases in which assessment orders were passed prior to 1-7-1963 in respect of the charge years prior to the above date.
' It may further be pointed out that in the above recent case of Commissioner of Income-tax v.
Nisar Ahmed decided by another Division Bench of this Court, it has been held that the section is not applicable in respect of an assessment order pissed prior to 1-7-1963. But the judgment does not dilate on the import of the words "from the date on or before which it was originally made payable". It may again be pointed out that factually the learned counsel appearing for the department conceded to the above legal position.
5. As pointed out hereinabove there is no -express provision providing the application of the section retrospectively, the question, therefore, in issue is that, whether the Legislature by employing the above words has manifested its intention to make the section applicable retrospectively. In this connection, it may be pertinent to observe that the section was to become a part of the Act and was intended to stay on the statute book for all time to come. In clause (a) of the section the words employed are "fails to pay the tax due from him", which being in present tense indicate that the section was to operate prospectively and not retrospectively. Whereas the factum of employing of the aforesaid words namely, "from the date on or before which it was originally made payable" make the provision capable of being applicable retrospectively.
' In my view the above apparent discrepancy is reconcilable. This may be explained by giving an example, say an assessm ent order is made and a demand notice is issued under section 29 of the Act in August, 1963 but the assessee concerned does not pay the due tax. In this case, if the Income-tax Officers invokes the section for levying additional tax on 1-12-1963, the question will arise, whether the Income-tax Officer should order the payment of additional tax at the rate given in the section for future from the date of the passing of the order or should it be made payable from the date of the original assessment order. The answer to the question is provided in the section itself, namely, from the date when the tax was originally made payable. The other view can be that the section covers even the cases in which the assessment orders were made and the demand notices were issued prior to 1-7-1963. Since two views are possible and as the provision is of a nature in a fiscal statute, the view which favours the tax-payers is to be preferred. It may again be pointed out that the respondent Department's stand before us is not that the additional tax is payable even for the period prior to 1-7-1963 in respect of an assessment order made and a demand notice issued a few years prior to the above date. The department's above stand is not reconcilable if I were to construe the above words namely, "from the date on or before which it was originally made payable" as conveying the meaning that the above date would include even a date of an assessm ent order passed and a demand notice issued a few years prior to the above date of 1-7-1963. This aspect has also been highlighted by Shafiur Rahman, J. In the above Lahore case of 1977.
6. In this regard, it may be pertinent to quote the observations of the Hon'ble Supreme Court in the case of Radha-Shyam Agarwala v. Commissioner of Income-tax (1), which read as follows "once the liabilities of the assessees have come into existence they cannot be altered in quantum, extent or character except by directIB retrospective leg is lation."
' Reference may also be made to the relevant passages from Maxwell on the Interpretation of Statutes 12th Edn. p. 256 and Crawford on the Construction of Statutes 1940 Edn. At pp. 562 to 564 which read as follows :- `Maxwell'.-Statutes imposing burdens.-Statutes which impose pecuniary burdens are subject to the same rule of strict construction. It is a well-settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties : the subject is not to be taxed unless the language of the statute clearly imposes the obligation, and language must not be strained in order to tax a transaction which, had the Legislature thought of it, would have been covered by appropriate words. "In a taxing Act," said Rowlatt, J., 'one has to look merely at what is clearly said. There is no room for any intendment.
There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. Tut this strictness of interpretation may not always enure to the subject's benefit, for "if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. . . . .
' Crawford. In General.-Retrospective legislation is looked upon with disfavour, as a general rule, and properly so because of its tendency to be unjust and oppressive. This disfavour is so great that some {{FOOT NOTE}}
(1) PLD 1960 S.0 187 {{FOOT NOTE}} of our state constitutions contain provisions which expressly prohibit the enactment of retrospective legislation. Nevertheless, even in the absence of constitutional provisions of this character, statutes, with but few exceptions, should, if possible, be construed so that they will have only prospective operation. Indeed, there is a presumption that the Legislature intended its enactments to have this effect to be effective only in future. This is true because of the basic presumption that the Legislature does not intend to enact legislation which operates oppressively and unreasonably; and retrospective laws will generally have such operation. Consequently, in the absence of any indication in the statute that the Legislature intended for it to operate retrospectively; it must not be given retrospective effect. If per chance any reasonable doubt exists, it should be resolved in favour of prospective operation. In other words, before a law will be construed as retrospective, its language must imperatively and clearly require such a construction.
' Moreover, in this connection, as a general rule, a statute expressed in general terms and in the present tense will be given prospective effect, and considered applicable to conditions coming into existence subsequent to its enactment, even though they were not actually known at the time of the enactment."
7. It will not be out of context to point out that prior to the enactment of the section the Act contained section 44, subsection (1) of which provided that "when an assessee is in default in making the payment of tax the Income-tax Officer may, in his discretion direct that in addition to the amount of the arrears a sum not exceeding that, amount shall be recovered from the assessee by way of penalty".
In presence of the above provision, it cannot, therefore, be urged that there was no provision prior to the enactment of the section for penalising a defaulting assessee and, hence the Legislature intended to provide a provision retrospectively to deter the tax-payers, who were in arrears.
8. I am, therefore of the view that the section cannot be pressed into service in respect of a tax amount, which had become due and payable on a date prior to the enactment of the section i,e, prior to 1-7-1963.
' NMMUDDIN, J.-I have had the advantage of reading the opinion by my learned brother Ajmal Mian, J., expressed on the question of interpretation of section 45-A of the Income-tax Act, 1922 (hereinafter called the Act) as added to Income-tax Act, 1922, by the Finance Act, 1963, and as substituted by the Finance Act, 1966.
It is desirable that I should also express my opinion for I have comet to the conclusion that the provisions of section 45-A would apply prospetively but for a different reason.
2. A perusal of this section shows that it provides payment of , additional tax on the amount of tax due from an assessee from the date on or before which it was originally made payable to the date of its payment. Therefore, the question is whether the provisions would also apply to the dues which had become payable before the addition of section 45-A to the Act or they would apply only to those dues which fall and are made payable after the addition of the said provisions in the Act.
3. However, before proceeding furiher I may state the relevant rules of interpretation.
It is the fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very! Clear in terms of the Act, or arises by necessary and distinct implication. See The Income-Tax Officer (Investigation) Circle I, Dacca and another v. Sulaiman Bhai Jiwa and others (1), Noor 'Muhammad v. The Province of West Pakistan (2) and Kamruzzaman v. The, Government of East Pakistan and others (3).
(i) I may also refer to a Full Bench case of Patna High Court namely, BannwariGope and others v.
Emperor (4) wherein after examining a large number of cases, following principles inter alia, were held to be well-settled :- "(1) Upon the presumption that the Legislature does not intend to enact what is unjust, every statute which takes away or impairs a vested right acquired under the existing law or creates a new obligaAion or imposes a new duty or attaches a new disability in respect of transactions or considerations already passed must be presumed to be intended not to have retrospective operation;
(2) if there are words in the enactment which either expressly state or necessarily imply that the statute is to be given retrospective operation, then the Act should have retrospective operation even though the consequences may appear unjust and hard ;
(3) a statute is not to be construed to have greater retrospective operation than its language renders necessary."
(ii) Reference to a passage from 'Statutory Construction" by Crawford, 1940 Edn., pp. 564, 565 would also be of advantage. It reads :- "But where an intention properly appears that the statute was inten-' ded to operate retrospectively, such operation must be confined as closely as possible. Still, if the legislative intent clearly requires it, complete retroactive effect must be given, and it does not matter how the statute or its legality is affected. This principle is equally applicable where the retroactive effect is required through implication. See : Smallwood v. Gallardo, 275 U S 56, 72 L Ed. 152; Goshen v.
Stoningt-On, 10-A, Dec. 121 ; Filipkowski v. Springfield Fire and Marine Ins Co., 206 78 A L R 613)."
(iii) It may also be useful to quote a passage from "Maxwell on the Interpretation of Statutes", 12th Edn., p. 215 which reads as follows : - "Upon the presumption that the Legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation. They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect is clearly intended. It is a fundamental rule of English Law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication."
In support of the rule stated above, reliance has been placed therein on West v. Gwyne (5), CF. Smith v. Challander (6), Re Snowdon Colliery Co. Ltd. (7). {{FOOT NOTE}}
(1) PLD 1970 SC 80 (2) PLD 1966 (W. P.) B J 19
(3) PLD 1968 Dacca 69 (4) AIR 1943 Pat. 18
(5) (1911) 2 Ch. 1 (6) (1901) A C 297
(7) (1925) 94 L J Ch. 305 {{FOOT NOTE}}
4. Having stated the relevant rules of interpretation I revert to the provisions of section 45-A of the Act, wherein, it may be pointed out, the words "from the date on or before which it was originally made payable" (emphasis supplied) are quite significant as in my opinion they clearly express the intention of the Legislature that they intended to apply the provisions of section 45-A retrospectively for a sum becomes due only after the passing of assessment order under section 23 of the Act in cases not covered by the provisions of section 18 or 18-A and becomes payable on the date mentioned in the notice of demand under section 29 of the Act. Accordingly the words "it was originally made payable" have reference to the date specified in the demand notice on or before which the tax should have been paid. If it was not intended to apply the provisions of section 45-A retrospectively then instead the verb "was" the verb "is" would and should have been used and then the adverb 'originally' would seem to be redundant or superfluous for the intention to apply the provisions prospectively would have been expressed by using the words "from the date on or before which it is made payable". There is presumption that the Legislature do not use any words unnecessarily. In R. v. Berchet (1) it was said to be a known rule of interpretation of statutes, that such a sense is to be made upon the whole as that no clause, sentence or word,IK shall prove superfluous, void or insignificant, if by any other construction they may all be made useful and pertinent And in Harcourt v. Fox (2), Lord Holt said : "I think we should be very bold men, when we are entrusted with the interpretation of Acts of Parliament, to reject any words that are sensible in an Act." This rule has often been acted upon. Thus, in Green v. R. (3), Lord Cairns stated, as a reason for differing from the Court below, that "the learned Judges absolutely reduce to silence the second part of this sentence, and make it altogether inapplicable". So in Cooper v. Slade (4), in the Court below, Bramwell, J. Was inclined to treat the proviso at the end of section 2 of the Corrupt Practices Prevention Act, 1854, as mere surplusage; but in his advice to the House of Lords (5) at p. 765, he stated that he had altered his opinion as to this, because it appeared that a reasonable construction could be put upon that proviso, and therefore, that construction ought to be adopted, instead of treating that proviso as if it did not exist at all.
' I may also refer to a decision of Supreme Court in Mian Raft Uddin and 6 others v. The Chief Settlement and Rehabilitation Commissioner and 2 others (6), wherein M. R. Khan, J. While construing paragraph 15-A of the Schedule to the Displaced Persons (Compensation & Rehabilitation) Act, 1959 and section 10 (b) observed at page 313 of the report as follows :- " If an order under paragraph 15-A is at all sustainable under section 10 (b) on the ground that the power under the former is covered by the powers under the latter, then. Paragraph 15-A will be rendered redundant and superfluous, for every order made under that paragraph can be said to have been made under section 10 (b).
' Can the Legislature be presumed to have intentionally enacted {{FOOT NOTE}}
(1) (1690) 1 Show, 108 (2) (1693) 1 Show. 506
(3) (1870) 1 App. Cas. 513 (4) (1858) 6 H L C 746
(5) (1858) 6 H L C 672 (6) P I D 1971 SC 252 {{FOOT NOTE}} paragraph 15-A as a superfluous provision ? No legislative enactment, according to the universally accepted principle, should be held to be redundant or superfluous, and effort must be made by Courts to given effect to every enactment."
' Reference may also be made to Messrs Karachi Steam Navigation Company Ltd. V. Messrs .Abdul Rahman-Abdul Ghani (1), wherein S. A. Rahman, J. (as his Lordship then was) at p. 94 of the report observed as follows : " It is, however, a cardinal principle of construction of statutes that redundancy must not be attributed to the Legislature unnecessarily."
It may be useful to refer yet to another decision of Supreme Court in East and West Steamship' Co. v. Queensland Insurance Co. (2), wherein Hamoodur Rahman, J. (as his Lordship then was) while construing the provisions of section 135-A of the Transfer of Property Act, 1882, observed at p. 702 of the report as follows :- ' If the assignment of the policy carried with it as one of its ordinary incidents the right to sue also, then subsection (1) of section 135-A was wholly redundant. But it is not peimissible for us whilst interpreting a statute to bold that any part thereof or any word therein is surplusage. Every word has to be taken into account and a meaning given to it. If, therefore, this rule of construction has to be observed and a meaning given to every word of the statute, then it seems to me that the scheme of the Transfer of Property Act is clearly to the effect that where the Legislature has intended that the right to sue should also- be tranferred, it has specifically so mentioned, whether such transfer is by violation of parties, as for example by assignment under subsection (1) of section 135-A, or by operation of law as for example by subrogation under section 92 thereof."
5. Therefore, the word 'originally' must be assigned some meaning which in my opinion could be that additional tax was made payable also N in respect of the tax that had already become due and payable before section 45-A was added to the Act.
6. It may be worthwhile to mention that the payment of additional tax on the tax dues made payable by , instalments has been separately provided in the proviso theref )re, that consideration would not weigh much while interpreting the main provisions of section 45-A as added in 1963, or the provisions of clause (a) (i) of section 45-A as substituted by the Finance Act, 1966.
7. It was however, argued by Mr. Ali Athar that the Legislature has used the verb 'fails' in the present indefinite tense which indicates that the provisions are intended to apply prospectively. This is correct only to the extent that the liability to pay the tax under the provisions of section 45-A could arise only prospectively, i,e, from the date of the addition of section 45-A to the Act, if the tax arrear was not paid immediately on the coming into force the Finance Act, 1963 but the additional tax would be payable under the said provisions from the date the tax due was originally made payable. There is no doubt that such an interpretation would cause inconvenience to an assessee from whom the tax was due at the time of addition of section 45-A for it would have been difficult for him to make payment of arrears of tax immediately on the addition of section 45-A. However, firstly, reason of inconvenience would not be a {{FOOT NOTE}}
(1) PLD 1962 SC 90 (2) PLD 1963 SC 663 {{FOOT NOTE}} ground to interpret the provisions otherwise when the words used in the enactment clearly or necessarily imply that statute should be given retrospective effect, secondly, to obviate the inconvenience the Central Board of Revenue issued Circular No, 4 containing instructions concerning amendments made in various sections. As regards section 45-A, the instructions provided allowing the assessee time till before 1-1-1964, to clear arrears of tax without payment of additional tax. It was however, provided that in case of failure to pay the arrears of tax before 1-1- 1964, the additional tax would be payable from 1-7-1963, and not from the date on or before which the tax was originally made payable as provided in section 45-A. It may be convenient if I quote the relevant paragraph of the Circular, which reads as follows : "(26). Section 45-A. Additional tax for delayed payment.-This is also a new section which provides for the payment of additional tax in the case of delayed payments. Where an assessee fails to pay the tax due from him, he is liable to pay an additional amount of tax equal to 6 per cent of the amount of tax due from him calculated from the date on which it was originally made payable to the date of its payment. The additional tax is also payable where the .Tax is allowed to be paid in instalments. The levy of this additional tax is compulsory and the Income-tax Officer has no discretion to waive it. In the case of arrears of tax, where the amount of tax had become due before the 1st July, 1963, the imposition of additional tax will however, be restricted to the period during which the tax remains unpaid on and after the 1st July, 1963. Where, however, the arreas tax which became due before the 1st July, 1963, is paid before the 1st January, 1964 no additional tax will be levied. If the arrears tax still remains unpaid on that date, additional tax will be levied with effect from the 1st July, 1963 to the date of its payment."
8. Thus, it will appear that the Central Board of Revenue itself applied the provisions for the payment of additional tax from 1-7-1963, that is, prospectively. But the choice of date for payment of additional tax from 1-7-1963, was not rightly accepted as valid by Shafiur Rahman, J in Mian Hameed Ahmad (of Premier Cloth Mills Ltd., Lahore v. Income-tax Officer (Investigation II), Lahore
(1) because that could not be the date from which the tax was originally made payable. Since however, the Board itself has interpreted the provisions so as to apply thus prospectively it would not be just and proper to disregard the departmental construction after more than 20 years moreso when the Legislature did not consider it necessary for all these years to undo the departmental construction.
9. I may add that the case of Radhashyam Agarwala v. The Commissioner of Income-tax East Pakistan (Central Secretariat), Dacca (2) has been distinguished by Channa, J. In Taimur Shah v.
The Commissioner of Income-tax (3) and I need not deal with it in detail here but would only add that section 45-A like section 3 of the Income-tax Act also contains a charging provision and it would apply on its own force to a tax liability that has arisen in accordance with its provision.
10. Before parting with this reference, I may however, mention that in this case the petitioners were granted instalments payable after the {{FOOT NOTE}}
(I) PLD 1977 Lab. 1168 (2) PLD 1960 SC 187 (3) PLD 1976 Kar. 1030 {{FOOT NOTE}} introduction of section 45-A into the Act. The question whether the order of payment of instalment was passed before or after 1-7-1963, and what would be the effect of such an order keeping in view the proviso to subsection 45-A is not required to be considered in this reference.
' HAIDER ALI P1RZADA, J.-I have the benefit of perusing the judgments to be delivered in this Constitutional petition by my learned brothers Naimuddin and Ajmal Mian, JJ.
' My learned brother Naimuddin, J. Has come to the conclusion that provisions of section 45-A would apply prospectively because the department itself applied the provisions for the payment of additional tax from 1-7-1963, that is, prospectively. My learned brother Ajmal Mian, J., on the other hand, has taken the view that the section cannot be pressed into service in respect of a tax amount which had become due and payable on a date prior to the enactment of the section. He has observed that the section is prospective.
' The facts which give rise to this petition. Are that on 31-12-1958 petitioners together with other members of their family filed a consolidated revised statement showing their excess income amounting to Rs, 49,845 for the entire period commencing with assessment year 1954-55 upto 31- 3-1958 as permitted by sub-para. (ii) of para. 2 of Martial Law Regulation 43. The total .`excess income' of the petitioners and other members of their family was finally determined at Rs, 1,12,69,201 which was allocated among the petitioners and other member of their family in the ratio of their share in the profits. In this manner a demand of Rs, 13,15,067/- for assessment year 1953-54 was created against the petitioner No, 1 and a demand of Rs, 11,10,700 was created against petitioner No,
2. By 25-6-1967 toe petitioner No 1 paid off the total demand. Petitioner No, 2 also paid off the total demand by 29-4-1967. On 24-5-1967 and 19-5-1967 the respondent No, 3 levied additional tax against petitioner No, 1 amounting to Rs, 2,68,687 and against petitioner No, 2 it amounting to Rs, 2,46,176.
' The petitioners filed revision applications against the levy of additional tax to Respondent No, 2 challenging the validity of levy. The respondent No, 2 by his orders dated 30-4-1969 rejected the applications. Petitioners made representation to the respondent No, 1 against the levy of additional tax. The representation was turned down. The petitioners being aggrieved against the order dated 29-5-1978 has filed this petition.
' From the above narration ffacts it will be seen that question to be decided in this petition is whether additional tax would be leviable under the law prior to 1-7-1963?
' The provision of additional tax under section 45-A was inserted in the Income-tax Act, 1922 for the first time by Finance Act, 1963 with effect from 1-7-1963. The Finance Act of 1966 amended the additional amount of tax from 6% to 8% per annum of the amount of tax due from the assessee.
This section provides that any income-tax specified in the notice of demand under section 29 of the Act should be paid within 35 days of the service of the notice. An assessee is deemed to be in default if he does not pay the tax within the time limited under section 29 of the Act.
' The additional tax can be levied on arrears of tax prior to 1-7-1963. I am inclined to hold that the case is one where the statute purports to operate only prospectively but such operation has, under the scheme of the Income-tax Law, to apply to outstanding income-tax payable before the provisions came into force. Such an enactment cannot, strictly speaking, be said to be retrospective legislation, though its operation may affect acts done in the past. Dealing with a tatute authorising the removal of destitute in an English case-Queen v. Sr. May Whitocharell (1), it was said "that the operation of the Statute is confined to persons who have become widows after the Act was passed and that the presumption against retrospective statute being intended supported this contention. But we have before shown that the statute is in its direct operation prospective as it relates to future removals only and that it is not properly called a retrospective statute because a part of the requisitions for its action is drawn from time antecedent to its passing."
' In the case of Director of Public Prosecution v. Lamb (2) certain persons were charged on an information, dated August 17, 1940, with certain currency offences committed between September 3, 1939 and May 11, 1940, and they pleaded guilty. The regulation in force at the time of the commission of the offe0nce limited the penalty for each offence to a fine of 100 or imprisonment for a term not exceeding three months or both. On June 11, 1940 the regulation was altered providing for a further alternative penalty of a maximum fine equal to three times the value of the currency in question. It was contended in that case that the amendment could not affect the punishment for an offence which was complete in other respects before the amendment was made and that if the conviction had taken place immediately after the offences had been committed it is only the unamended regulation which would have been applied. The said contention was rejected on the ground that as the amended regulation is plain and is in any way ambiguous, it should be applied to all convictions after the date at which it came into force and it is, therefore, immaterial as to when the offence was committed. Humphreys J. Said at page 505 :- "I take the view that the magistrate was wrong in considering that the doctrine hampered him in any way from giving effect to the perfectly plain language of this order-in-council. To my mind, it was totally immaterial for him to consider what would have been the result and what would have been his powers if this matter had come before him six months earlier than it did. It had nothing to do with it. He was sitting on September 4 and all that he was concerned with was his powers on that date. In my opinion, his powers are perfectly clearly stated in that regulation into which the paragraph in question had been incorporated ever since the previous June 11."
' Tueker, J., dealing with the same contention, expressed at page 508: "I am unable to agree with that submission. It is true that, so far as the creation of any substantive offence is concerned, it is not retrospective. It is not making an offence of something which previously was not an offence, and it is, of course, dealing with the future when it says, 'Any person is convicted', and is not referring to any person who has been previously convicted. However, where I think that it has a retrospective effect is with regard to the penalty which it imposes. If we suppose that next week the regulation with regard to looting were to be amended by a provision which said, 'Any person convicted of looting shall suffer the penalty of death, and regulation so-and-so shall be amended accordingly', I think that it would be difficult to persuade anybody who was next {{FOOT NOTE}}
(1) (1848) 12 Q B 120=116 E R 811 (2) (1941) 2 All E R 499 {{FOOT NOTE}} week convicted of the offence of having looted six months ago that that regulation had not a retrospective effect. I think that it clearly would have retrospective effect qua punishment, and I think that this regulation has a retrospective effect with regard to the penalty which it imposes.
' That merely throws us back upon the application of the principle to a case of this kind, which is a case rather different from any of those in the authorities to which we have been referred. One has to look at. The regulation and see the language which has been used. When one finds the regulation dealing with what was then an existing and known offence and dealing with the person's future conviction of that offence, and when it uses the simple, plain and clear language that any person convicted of that offence shall be liable to certain penalties, I think that it is clear that the language used is in terms applicable to an offence which has already been committed. It is not a case of a regulation creating any new offence, nor is it, for that matter, a regulation providing for some different kind of penalty or punishment altogether. It is merely increasing the amount of a monetary fine. In my view, the words are clear, and, although I do not altogether like the idea of punishments being increased after the offences have been completed, nonetheless, if the language is clear, and if that is the result, 1 think that it is impossible to escape from the consequences of the language which has been used."
' In Buckman V. Button (1), one Buckman was charged with certain offences under the Defence (General Regulations) and was convicted. After the commission of the offences but before the hearing of the case the regulations were amended by increasing the penalties for such offences.
The question arose was as to whether the increased penalties provided for in the amended regulation could be imposed. It was held that the imposition of higher penalties provided by the amended regulation which was in force at the time of the hearing was right in law. This case confirms the decisions in Lamb's case, referred to above, in so far as it deals with the position where the penalty is increased after the offence is complete.
' It is advantageous to reproduce a passage at page 392 of Craies on Statute Law, 7th Edition which reads as under :- "If it is a necessary implication from the language employed that the Legislature intended a particular section to have a retrospective operation, the Courts, will give it such an operation, 'Bum Parke', said Lord Hatherlay in Park v. Bingham, did not consider it an invariable rule that a Statute could not be retrospective unless so expressed in the very terms of the section which had to be construed, and said that the question in each case was whether the Legislature had sufficiently expressed that intention. In fact, we must look to the general scope and purview of the Statute, and at the remedy sought to be applied, and consider what was the former state of law, and what it was that the Legislature contemplated." , ' The following passage at page 292 of Oder's Construction of Deeds and Statutes, 5th Edition: " A new class of Legislation, namely, Legislation against tax evasion, which may be free from any presumption against retrospective effect is indicated by the judgment of the Court of Appeal delivered by {{FOOT NOTE}}
(1) (1943) 2 All E R 82 {{FOOT NOTE}} Lord Green, in Lord Howard de Walden V. Inland Revenue Commissioner."
In Lord Howard de Walden v. Commissioner of Inland Revenue (1), the Court considered the scope of section 18 of the Finance Act of 1936. It was argued for the assessee in that case that the section is penal in its nature and, therefore, it should have a restricted meaning. While meeting that contention Lord Greene M. R. Said :- "The section is a penal one, and its consequences, whatever they may be, are intended to be an effective deterrent which will put a stop to practices which the Legislature considers to be against the public interest. For years a battle of Manoeuvre has been waged between the Legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects. In that battle the Legislature has often been worsted by the skill, determination and resourcefulness of its opponents, of whom the present appellant has not been the least successful.
It would not shock us in the least to find that the Legislature has determined to put an end to the struggle by imposing the severest of penalties. It scarcely lies in the mouth of the tax-payer who plays with fire to complain of burnt fingers. It is not, however, necessary for us to choose between the second and third constructions. We would rather defer that choice until a case which raises the issue can be considered on its own facts.' In the present case it is sufficient to say that the appellant is in our opinion chargeable in respect of the entire income of the Canadian companies, the whole of which is to be traced to the assets originally transferred to them.
' One further point taken by counsel for the appellant may be mentioned. He pointed out that in so far as the right to enjoy income of the four companies is vested in the appellant's son, who holds the majority of the shares, income received by the son will be taxed in his hands in the ordinary way, and at the same time the appellant will be liable to tax on the whole income of the companies which is deemed to be his. This, it was urged, involves double taxation, since no relief is afforded by paragraph 3 of the Second Schedule to the Finance Act, 1936. There is a short answer to this argument. There is no double taxation since the subject-matter of tax is different, the income of the son being one thing and the income of the companies being another. But, quite apart from this, the argument based on hardship leaves us unmoved. The son will bear tax in the ordinary way upon his own income, the father will be taxed on the companies' income because he is the person against whom the deterrent action of the section is directed. The fact that the section has to some extent a retroactive effect again appears to us of no importance, when it is realised that the legislation is a move in a long and fiercely contested battle with individuals who wellunderstand the rigour of the contest."
I am inclined to hold that so long as the language of the statute is clear, the language should be given full effect without reference to the time of the commission of the offences that as the transgression of the law has no reference to the assessment year the payment of additional tax for delayed payment of tax can only be under the law that was in force on {{FOOT NOTE}}
(1) (1941) 23 T C 121 =(1942) 10 I T R (Supp.) 90 (C A) {{FOOT NOTE}} the date when additional tax is levied and it cannot have any reference to the law in force during the assessm ent year as contended by the learned counsel for the petitioners.
' I am inclined to agree with learned counsel for the department when he says that the words of the statute have to be given its full scope and effect and if the words of the statute are of sufficient amplitude to cover infringements that took place before the insertion, their operation cannot be curtailed or restricted so as to apply only to infringements after these insertion on the ground that an amendment or insertion is normally prospective. The decisions in Lamb's case and Buckman's case also proceed on the basis that if the language of the Statute is clear, it is impossible for any one to escape from the consequences of the language which has been used.
' The learned counsel for the petitioners has contended that the levy of penalty being in the nature of an additional tax levied for a contumacious conduct, the Law that is applicable to income-tax assessm ent should also govern the levy of additional tax, and the canon of construction of the provisions relating to additional tax should be the same as for tax. According to the learned counsel normally the law as on the first of July of the assessment year should be taken to apply in respect of assessm ent to tax and that the same has to apply even in respect of additional tax.
It is well-settled that for the purposes of assessment to income-tax the law to be applied is that Law that is in force in the assessm ent year: in other words, the income-tax as stands amended on the first day of July of a financial year will apply to the assessment of that year. This principle enunciated by the Privy Council in Maharayab of Pithapuram v. C.
1. T. (1) has since been reiterated by superior Courts.
' The levy of additional tax can only be after the completion of the assessment, and the proceedings for the assessm ent and levy of additional tax are independent of each other and that, therefore, the law during the assessment year cannot be taken to govern the additional tax proceedings.
' In my opinion, the assessm ent of the total income and the computation of tax liability is a proceeding which, for that purpose, is governed by entirely different consideration from a proceeding for additional tax imposed for delayed payment of such arrears of income-tax. In the case of the assessm ent of income and the determination of the consequent tax liability, the relevant law is the law which rules during the assessment year in respect of which the total income is assessed and tax liability determined. The rate of tax is determined by the relevant Finance Act.
In the case of an additional tax, however, I must remember that an additional tax is levied on account of delayed payment of such arrears of income-tax. In the instant case the petitioners were in arrears of income-tax prior to 1-7-1963.
' In the instant case the Finance Act, 1963 become effective from July 1, 1963 and the Income-tax Officer had merely given effect to the legal provisions of section 45-A of the Act by insisting that in view of the provisions would have to pay at the rate of 8% per annum only from 1-7-1963. There was absolutely no question of the provisions of section 45-A operating retrospectively, nor there was any question of the section taking away vested right which had accrued to the petitioners. {{FOOT NOTE}}
(1) (1945) 13 IT R 221=AIR 1945 P C 89 {{FOOT NOTE}} ' After giving my anxious consideration to the matter, I find myself in agreement with the view taken by Naimuddin, J. Now this matter will be placed before the Division Bench for disposal of the petition on merits.