1. ' Z. A. CHANNA , J.-On the application of the assessee, Malik Taimur Shah, the Appellate Income-tax Tribunal, hereinafter referred to as the Tribunal, has referred under section 66(1) of the Income-tax Act, 1922, for the decision of this Court, the following three questions said to have arisen from the Tribunal's order dated 22nd November, 1966:-
(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that additional tax was properly levied for non-payment by the due dates, of the regular tax determined by the Income-tax Officer in respect of the charge years 1958-59 (supplementary), 1959-60 to 1960-61?
(2) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that cancellation of the original assessment, in the firm's case automatically cancelled the applicant's original assessm ent and for that reason the Income-tax Officer could make the second assessm ent?
(3) Whether on the facts and in the circumstances of the case the Tribunal was right in regarding subsections (2-B) and (2-D) of section 34 of the Income-tax Act, so far as they affected the assessm ent relating to the period prior to 8th June, 1962 as validly enacted being infra vices of the Legislature and the re-assessm ent for the charge year 1958-59 (supplementary) was a valid and proper assessm ent ?
2. ' The assessee is a partner in the firm of Messrs Mustafa R. C. C. Pipe Works, Karachi. His assessment for the charge year 1958-59 (supplementary) was finalized on 31-12-1964, while his assessments for the charge years 1959-60 and 1960-61 were finalized sometime in the year 1965. In pursuance of these assessm ents, the Income-tax Officer issued three separate demand notices. The demand notice in respect of the charge year 1958-59 (supplementary) was issued on 9-1-1965, while notices of the demand in respect of the charge years 1959-60 and 1960-61 were served on the assessee on 4-7-1965 and 20-7-1965 respectively. As the assessee failed to pay the tax even after these notices of demand the Income-tax Officer, by three separate orders, issued in September, 1965, imposed additional tax on the assessee for each of the three charge years in question.
3. ' The assessee challenged the imposition of the additional tax before the Tribunal on the ground that the provisions of section 45-A, which section had been inserted in the Income-tax Act with prospective effect by Act XVI of 1963, could not be made applicable to the tax in respect of the years before the said section was added in the Income-tax Act. The Tribunal, however, repelled this contention and dismissed the assessee's appeal. The assessee accordingly applied to the Tribunal for reference and decision by this Court of certain questions of law which are said to have arisen from the order of the Tribunal. The Tribunal, while referring the questions to the Court, has re- phrased them and amalgamated some of them.
4. ' Mr. Ali Athar, the learned counsel for the assessee, stated at the bar that he did not press questions Nos. 2 and 3 and accordingly he has made his submissions only in respect of question No. 1. The contention of the learned counsel is that the assessee has to be charged tax for any specified charge year in accordance with the rates prescribed by the provisions of the Finance Act applicable to that year and that the extent, scope and nature of his liability for such a year cannot be altered in any way with reference to a subsequent amendment, unless that subsequent amendment has been either expressly made retrospective or its effect is retrospective by necessary intendment. His argument, in other words, was that the Income-tax Act by itself creates no liability or charge but merely provides the machinery for the enforcement of the liability, while the liability itself is created by the Finance Act. According to him it is only when the Finance Act is passed that the machinery comes into play and that machinery necessarily determines the liability of an assessee solely with reference to the provisions of the Finance Act. Mr. Ali Athar contended that inasmuch as section 45-A of the Income-tax Act was enforced after the charge years in respect of which the assessee was assessed to income-tax, the assessee cannot in respect of those years be made liable for payment of additional tax under the said section, irrespective of the date or dates when the assessment for those years was completed or default in the payment of income-tax for those years occurred.
5. ' In support of his contention Mr. Ali Athar referred us to the case of Badhashym Agarwala v.
6. Commissioner of Income-tax (1). That was a case where a firm started jute business on 16th September, 1950. It closed its accounts for that year on 29-6-1951 and submitted a return for the same. Together with the return an application was submitted under section 26-A of the Income- tax Act for the registration of the firm. A complication, however, arose because the Central Board of Revenue, in exercise of the powers conferred on it under section 2 of the Income-tax Act, issued a notification on 24th August 1951, determining the previous year in the case of an assessee who carried on business in Jute during the season 1950-51 in East Bengal, to be the period of 12 months ending on 30th June, 1951. The Income-tax Officer accordingly assessed the firm on the basis of this notification and also rejected the application under section 26-A on the ground that there was no firm. On appeal to the Tribunal, it held the notification to be ultra vires and further rejected the application under section 26-A on the ground that there was no previous year in respect of the firm for the year of assessm ent 1951-52. Muhammad Munir, C. J., who wrote the judgment on behalf of the Supreme Court, after analysing the general scheme of the Income-tax Act and its relationship with the Finance Act, held that the notification of the C. B. R. Was ultra vires and observed as follows:- "The basic feature of the Income-tax Act is that the various liabilities created by it arise only when their extent is determined by the Finance-Act."
7. ' Section 3 of the Income-tax Act declares:- "Where any Act of Parliament enacts that income-tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of this Act in respect of the total income of the previous year of every individual, Hindu undivided Family, company and local authority and of every firm and other association of persons or the partners of the firm or members of the association individually.
8. ' The machinery provided by the Act for the enforcement of a liability comes into motion only when the Finance Act determines the rate-or rates of tax on the total incomes of different classes of assessees for the previous year. When these rates have been specified, then by virtue of section 3 tax at those rates has to be charged for the {{FOOT NOTE}}
(1) PLD 1960 SC 187 {{FOOT NOTE}} ' assessm ent year in question in accordance with the provisions of the Income-tax Act in respect of the total income of the 'previous year' of different classes of assessees. If there be no Finance Act, the Income-tax Act remains a dormant statute, but with the passing of the Finance Act it comes at once into activity and the machinery created by it immediately gets into gear to enforce the liabilities of different classes of assessees. Another point, equally basic, to be remembered in connection with the Income-tax Act is that once the liabilities of the assessees have come into existence they cannot be altered in quantum, extent or character except by direct retrospective legislation."
9. ' Mr. Ali Athar has mainly relied upon the observation in the said judgment which we have underlined* in support of his argument that the liabilities of the assessee in respect of the three years in question could only be determined with reference to the Finance Acts for those years and could not be affected by subsequent legislation which was not of retrospective character.
10. ' We have given very careful consideration to the arguments of the learned counsel for the assessee and the very weighty observations of the Supreme Court, but on a careful analysis of the entire judgment of the Supreme Court, it is or humble view that these observations have to be construed only in regard to the liabilities which are created by the Finance Act, namely, the rates of income-tax which can be charged, and to which specific reference has ben made in section 3 of the Finance Act. The Supreme Court was dealing with a case in which the C.B.R. Had altered the period of a previous year, after a substantial part of that year had already elapsed. The result was that instead of the assessee being charged tax for the previous year, determined on the basis of the date up to which his accounts for that year had been made up, he was charged to tax for a previous year determined in accordance with the notification of the C.B.R. This notification, as already pointel out, was issued after a substantial part of the previous year had elapsed and the Finance Act governing the assessme nt for the previous year had come into operation. It was on this basis that the Supreme Court held that it was not permissible to change the previous year as the Finance Act had come into operation. In coming to this decision their Lordships of the Supreme Court relied upon a decision of the Privy Council in the case of Maharaja Pithapuram v.
11. Commissioner of Income-tax, Madras (1). That was a case where, several years before the year of assessm ent, the assessee had transferred certain assets to his daughters under revocable transfers. For the assessm ent year 1939-40 the income from the assets transferred by the assessee was included in his own income for the previous year on the basis of the amendment effected by the Income-tax (Amendment) Act, 1939, which provided that income from the assets thus transferred shall be deemed to be the income of the transferor. The contention raised before the Privy Council was that incomes from transferred assets were not liable to such inclusion because the transfer had been made before the Amendment Act, 1939. The Privy Council, on the basis of the provisions of section 3 of the Income-tax Act, which provides for the imposition of income-tax for the previous year, repelled this contention. It may be pointed out that even the Privy Council in that case held that the Income-tax Act, 1922, as amended from time to time forms a code, which has no operative effect except so far as it is rendered applicable by the Finance Act. {{FOOT NOTE}}
(1) 2 ITC 167 {{FOOT NOTE}} *Mere in italics)
12. ' In or humble opinion, therefore, the dictum laid down by their Lordships of the Supreme Court in Radhashyam Agarwala's case is to be-understood with reference to section 3 of the Income-tax Act and the rates of income-tax imposed by the Finance Act, but would not effect any provisions of the Income-tax Act which are not directly controlled, or affected by the rates of income-tax.
13. ' The additional tax which can be imposed under section 45-A of the Income-tax Act is in the nature of a penalty for delayed payment of the tax due and the rate of such additional tax is also prescribed in the said section and is not governed by the Finance Act. The only relationship which this tax has with the Finance Act is that the tax due, fir failure to which it can be imposed. Has to be determined or computed with reference to the rates of income-tax prescribed under the Finance Act.
14. ' In order to appreciate the scope of the section, it would be appropriate to reproduce it. At the relevant time it ran as follows:- "45-A. Where any assessee fails to pay the tax due from him, he shall, without prejudice to his liability under any other provisions of the law, be liable to pay an additional 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 the date of its payment.
15. ' 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."
16. ' 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. If the intention of the Legislature had been that the application of this section should be restricted to the tax due for the charge years following insertion of the said section then this intention would have been made manifest by the use of appropriate words. There is, however, nothing in section 45-A, which implies that its application is restricted to tax due for the years following the insertion of the said section. In a fiscal statute, its provisions have to be strictly construed and no additions to or omissions therefrom are permissible. As such, we are unable to construe section 45-A of the Act so as to limit its application to tax due for the years following its addition to the Act as this can only be done if we were to add these words or words of similar import in the section, which is not permissible to us. According to Maxwell, 10th Edition : "It is but a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are similar adequate grounds to justify the inference that the Legislature intended some thing which it omitted to express." As observed by Lord Mersey in (1910) A C 409, 420: "It is a strong thing to read into an Act of Parliament words which are not there, and, in the absence of clear necessity, it is a wrong thing to do." Since the tax for the charge years 1958-59 (supplementary), 1959-60 and 1960-61 was admittedly due from the assessee when section 45-A C formed a part of the Income-tax Act, he became liable to the additional tax envisaged by the said section.
17. ' 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. In support of his contention that though a provision has not expressly been made retrospective but the words used therein may clearly indicate that it has retrospective operation, he relied upon the case of I. T.
0. v. Sullalman Bhai Jiva (1) wherein it was held that the words, such as "shall" or "hereinafter", should be taken to indicate the legislative intent that the statute is to be construed as prospective only but on the other hand the use of the words denoting past time, such as "has been" or "heretobefore", construed an expressive declaration that the Act is to be construed retrospectively.
18. We find ourselves unable to agree with the broad proposition of Mr. Nusrat that the word "due" has an implication of a liability which is continuing from the past. In re : Fastnedge, Ex P. Kemp (2)
19. Melish, L. J, while construing in a bankruptcy case, the import of the words, debts due to him in the course of his Trade or business, observed: "Now the words "debts due to him" are certainly words which are capable of a wide or a narrow construction. I think that prima facie and if there is nothing to give them a different construction, they would include all sums certain which a person is liable to pay, whether such sums had become actually payable or not "
20. ' 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 and 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.
21. ' We would accordingly answer the first question referred to us, which is the only one which has been argued by Mr. All Athar, in the affirmative.