' ABDUL SHAKURUL SALAM, J.-Writ petitions, numbered as,
1. W. P. No, 1953/73,
2. W. P. No, 1954/73 3. W.
P. No, 1955/73 4. W. P. No, 1936/73 5. W. P. No, 195 /73 6. W. P. No, 1958/73 7. W. P. No, 1959/73 8. W. P.
No, 1960/73 9. W. P. No, 1961/73 10. W. P. No, 1962/73 11. W. P. No, 1963/73 12. W. P. No, 1964/73 13, W. P. No, 1965/73 14. W. P. No, 1966/73 15. W. P. No, 1967/73 16. W. P. No, 1968/73 17. W. P. No, 1969/73 18. W. P. No, 1959/72 19. W. P. No, 196c/72 20. W. P. No, 1230/72 21. W. P. No, 1495/71 22. W. P. No, 84/74 23. W. P, 250/73 24. W. P. No, 480/72 25. W. P. No, 524/72 26. W. P. No, 538/73 27. W. P. No, 526/72 28. W. P. No, 525/72 29. W. P. No, 481/72 30. W P. No, 479/72 31. W. P. No, 539/72 32. W. P. No, 537/72 33. W. P. 102/74
34. W. P. 101/74 35. W. P. 568/74 36. W. P. No, 569/74 37. W. P. No, 1114/75 & 38. W. P. No, 1377/71 were dismissed by a short order dated 19-1-1976. The detailed reasons are given below :-
2. In these petitions, the common questions involved are about the validity of orders passed by the concerned Income-tax Officers demanding additional amounts of tax under section 18-A (6) and
(8) and section 45-A of the Income-tax Act, 1922. For facility of reference, section 18-A and section 45-A of the aforesaid Act are quoted as below:- 1118-A. Advance payment of tax.-In the case of income other than income in respect of which provision is made under subsections (2) and (2-B) of section 18 for deduction of income-tax at the time of payment, an assessee shall pay quarterly to the credit of the Central Government on the fifteenth clay of September the fifteenth day of December the fiteenth day of March and the fifteenth day of June in each financial year, respectively, an amount equal to one quarter of the income-tax and super tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed under section 23 or, where no assessm ent under section 23 has been made under section 23-B, as the case may be, if that total income exceeded twenty five thousand rupees. Such income-tax and super tax shall be calculated at the rates in force in respect of the year in which he is required to pay the tax; and shall bear to the total amount of Income-tax and super tax so calculated on the said total income the same proportion as the amount such inclusions bears to his total income er, in cases where under the provisions of subsection (I) of section 17 tax is chargeable with reference to the total world income, shall bear to the total amount of tax which would have been payable on his total world income of the said previous year had it been his total income the same proportion as the amount of such inclusions bears to his total world income. The tax so calculated shall be reduced by the amount of the tax deducted during the said year under subsections (3), (3-A), (3-B), (3-BB), (3-C) or (3-E) of section 18 : ' Provided that, where the previous year of the assessee in respect of any source of income ends after the thirty first day of March and before the thirty first day of July, the payment of Income-tax and super tax on that source of income shall be made in three payments of equal amount to be made on the fifteenth day of December, the fifteenth day of March, and the fifteenth day of June, respectively: ' Provided further that, if the assessee is a partner of a registered firm and an assessment of the firm has been completed for a previous years later than that for which the assessee's last assessm ent has been completed, his share in the profits of the firm shall, for the purposes of this subsection, be included in his total income on the basis of the latest assessment of the firm: ' Provided further that, if before the fifteenth day of May of the year, an assessment of the assessee, or of the registered firm of which he is a partner, is completed in respect of a previous year later than that on the basis of which the tax was computed under this clause, the assessee shall pay in one instalment on the specified date, or in equal instalments on the specified dates, if more than one falling after the date of the said assessment, the tax computed on the revised basis as reduced by the amount, if any, paid in accordance with the original computation. (2) If any assessee who is required to pay tax under subsection (1) estimates at any time before the last instalment is due that the part of his income to which the subsection applies for period which would be the previous year for an assessment for the year next following is less than the income on which he is required to pay tax and accordingly wishes to pay an amount less than the amount which he is so required to pay, he may send to the Income-tax Officer an estimate of the tax payable by him calculated in the manner laid down in subsection on that part of his income for such period, and shall pay such amount as accords with his estimate in equal instalments on such of the dates specified in subsection (1) as have not expired or in one sum of only the last of such dates has not expired!
' Provided that the assessee may send a revised estimate of the tax payable by him before any one of the dates specified in subsection (1) and adjust any excess or deficiency in respect of any instalment already paid in a subsequent instalment or in subsequent instalments.
(3) Any person who has not hitherto been assessed shall, before the fifteenth day of June in each year, if his total income of the period which would be the previous year for an assessment for the year next following is likely to exceed twenty five 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 subsections (2), (2-A) and (2-B) of section 18 do not apply of the said previous year calculated in the manner laid down subsection (1), and shall pay the amount, on such of the dates specified in that subsection as have not expired, by instalments which may be revised according to the proviso to subsection (2). (4) Where part of the income to which subsection (1), (2) or (3) applies consists of any income of the nature of commission which is receivable periodically and is not received or adjusted by the payer in the assessee's account before any of the quarterly instalments of tax become due, he may defer payment of tax on that part of his income to the date on which such income would be normally received or adjusted and if he does so he shall communicate to the Income-tax Officer the date to which such payment is deferred: Provided that, if the tax of which the payment is deferred is not paid within fifteen days of the date on which such income or part thereof is received or adjusted by the pager in the assessee's account, he shall, without prejudice to any other consequences which may follow, be deemed to be an assessee in default in respect of such tax and shall pay an additional amount of tax thereon at the rate of two per cent. Per mensem from the data of such receipt or adjustment to the date of payment of tax.
(5) The Central Government shall pay on any amount paid under sub. Sections (1), (2), (3) and (4) simple interest at four per cent. Per annum from the date of payment to the thirtieth day of June of the financial year in which the amount was paid.
(5A) The Central Government shall pay on any amount paid under subsections (1), (2), (3) and (4) which is in excess of the tax payable on provisional assessment under section 23-B simple interest at four per cent. Per annum from the date of such provisional assessment to the date of assessm ent under section 23.
(6)Where in any year an assessee has paid tax under subsection (2) or subsection (3) on the basis of his own estimate and the tax so paid is less than eighty percent of the tax determined on the basis of assessm ent under section 23, hereinafter called regular assessment, and calculated in the manner laid down in subsection (1) so far as such tax relates to income to which the provisions or subsections (2), (2-A) and (2-B) of section 18 do not apply, an additional amount of tax at the rate of two per cent per mensem from the first day of April in the year in which the tax was paid up to thirtieth day of June of the year next following or up to the date of the said regular assessment, whichever is the earlier, shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty percent: ' Provided that-
(a) where tax is paid under section 22-A, or
(b) where a provisional assessm ent under section 23-B has been made but regular assessment has not been made, ' the additional amount of tax shall be calculated in accordance with the foregoing provisions:-
(I) up to the date on which tax under section 22-A or as provisionally assessed was paid; and
(ii) thereafter such additional amount shall be calculated at the rate aforesaid on the amount by which the tax as so paid, in so far as it relates to income to which the provisions of subsections (2), (2-A) and (2B) of section 18 do not apply, falls short of the said eighty per cent: ' Provided farther, that, where, as a result of an appeal under section 30 or of a provision under section 33-A or of a reference to the High Court under section 66, the amount on which additional tax was payable under this subsection has been reduced the additional tax shall be reduced accordingly and the excess additional tax paid, if any, shall be refunded together with the amount of income-tax that is refundable: Provided further that, where a business, profession or vocation is newly set up and is assessable on the income, profits and gains of its first previous year in the year following that in which it is set up, the additional tax payable shall be computed from the first day of July of the said year.
(7) Where, on making the regular assessment, the Income-tax Officer finds that any assessee has-
(a) under subsection (2) or subsection (3) under-estimated the tax payable by him and thereby reduced the amount payable in any of the first three instalments, or
(b) under subsection (4) wrongly deferred the payment of tax on a part of his income ; he may direct that the assessee shall pay an additional amount of tax at two per cent. Per mensem, in the case referred to in clause (a) for the period during which the payment was deficient on the difference between the amount paid in each such instalment and the amount which should have been paid having regard to the aggregate tax actually paid under this section during the year, and in the case refferred to in clause (b) for the period during which the payment of tax was wrongly deferred on the amount of which the payment was so deferred ; ' Provided that for the purposes of this sub-section any instalment due before the expiry of six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months.
(8) Where, on making the regular assessment, the Income Tax Officer finds that payment of tax has not been made in accordance with the foregoing provisions of this section, additional tax calculated in the manner laid down in subsection (6) shall be added to the tax as determined on the oasis of the regular assessm ent.
(9) (a) If any assessee does not pay on the specified date any instalment of tax that he is required to pay under subsection (1) and does not, before the date on which any such instalment as is not paid becomes due, send under subsection (2) an estimate of a revised estimate of the tax payable by him, he shall be deemed to be an assessee in default in respect of such instalment or instalments.
(b) If the assessee has sent under subsection (2) or subsection (3) and estimate or a revised estimate of the tax payable by him, but does not pay any instalment in accordance therewith on the date or dates specified in subsection (1), he shall be deemed to be an assessee in respect of such instalment or instalments : Provided that the assessee shall not, under clause (a) or (b) be deemed to be in default in respect of any amount of which the payment is deferred under subsection (4) until after the date communicated by him to the Income-tax Officer under that subsection.
(10)Any su n other than a penalty or the additional amount of tax paid by or recovered from an assessee in pursuance of the provisions of subsections (1), (2), (3) and (4) shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessm ent for the next following the year in which it was payable, and credit therefore shall be given to the assessee in the regular assessment.
(11)Any income chargeable under the head "Capital Gains" shall not be taken into account for any of the purposes of this section.
45-k Additional tax for delayed payments.-Where any assessee-
(a) fails to pay the tax due from 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 results of completion of the relevant assessment under section 23, he shall, without prejudice to his liability under any other provision of law, pay an additional amount of tax equal to eight per cent. Per annum of-
(I) in ease referred to in clause (a), the amount of tax due from him from the date on or before which it was originally made payable (hereafter in this section referred to as the said date) to the date of its payment;
(a) in cases referred to in clause (b), the amount by which the tax paid under section 22-A falls short of 80 per cent. Of tax payable under section 23, from the date of payment of the tax under section 22-A, to the date of completion of the assessment under section 23th Mr. Muhammad Ali, Advocate appearing for the petitioners in all these petitions has argued at length and quoted various rulings of great authority which will be referred to later. He submitted the following propositions, Firstly, that the impugned provisions are invalid for lack of legislative competency on the past of the Federal Legislaturs because the demand of additional amount of tax on the non- paid, or, under-paid tax amounts to taxing the tax and that no tax can be imposed on a tax because the latter is an expenditure and tax can only be imposed on income. It is submitted that the insertion of "additional amount of tax' in the definition of "Income-tax" in subsection (14) of section 2 of the above mentioned Act by the Finance Act, 1974 is of no effect either because by defining a term, the Legislature cannot acquire power which is not conferred on it by the Constitution and cannot, therefore, do what it is not authorised to do. It is submitted that the tax can be imposed under section 3 of the Income-tax Act, 1922 by a Central Act, which is done by a Finance Act in virtue of authority granted to the Legislature by the relevant Constitutional provisions. Without such an empowerment, the Central Legislature has no power by an indirect method to impose tax by calling that as "additional amount of tax" and defining the same to be included in the definition of income-tax. Secondly, the learned counsel has contended that the impugned provisions, above quoted, when applied alongwith other provisions, in the Income-tax Act for violation of its provisions, amount to double jeopardy which is prohibited by Article 13 of the Constitution of 1973 and are, therefore, unconstitutional. In reply to an objection raised by the learned counsel for the respondents that the petitioners had not availed themselves of alternate remedies provided under the Income-tax Act the learned counsel for the petitioners has submitted that there is no right of appeal against the impugned orders and that a revision or reference is no right of a litigant Further, that as the impugned provisions are being challenged on Constitutional grounds, inspite of alternate remedies, the petitioners have a right to challenge the same by means of a petition under the Constitution and that, lastly, since the questions raised in these petitions relate in the challenge of the provisions in the Income Tax Act itself, it would not he possible far the authorities created by the Income-tax Act to declare the same to be invalid. It is submitted that a Court interpreting the Constitution finally is an appropriate forum to raise the questions. The submission is obviously sound and is sustained.
3. Before adverting to the contentions of the learned counsel for the petitioners on merits which he canvassed very ably, if I may say so with respect, it may be said straight-away, that he is quite right when he made the submissions about the principles governing interpretation of financial liabilities. On well based judgments, the propositions are stated in Maxwell, Rules of Interpretation, 12th Edition at page 257 as under: "It it 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 penalities "(as in penal laws)" the subject is not to be taxed unless the language of the Statute clearly imposes the objection (1) 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 Rowlait 3., 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". But this strictness of interpretation may not always ennure 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 hardship may appear to the judicial mind to be."
5. Similarly, Craies on Statute Law, 17th Edn., pp. 112, 115 states the following principles in respect of interpretation of such statutes "If a statute professes to impose a charge, "the rule", said the Judicial Committee in Oriental Bank v. Wright, is "that the "intention to impose a charge upon a subject must be shown by clear and unambiguous language". In Dock Co. At Kingston-upon-Hull v. Browne, Lord Tenterden, C. J. Said: "These rates are a tax upon the subject and it is a sound general rule that a tax shall not be considered to be imposed (or, at least, not for the benefit of a subject) without a plain declaration of the Legislature to impose it." This accords with the view expressed by Parke B. In re Micklethwait: "It is a well established rule that the subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words". In Partkgton v. Att.-Gen., Lord Cairns said: I am not at all sure that, in a case of this kind-a fiscal case-form is not amply sufficient : because, as I understand the principle of all fiscal legislation, it is this: 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. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statutes, what is called an equitable construction, certainly such a construction is not admissible in a taxing statutes' where you simply adhere to the words of the statute." In Canadian Eagle Oil Co. v. R. Viscount Simon L. C. Said : In the words of the late Rowlatt, J. (in Cape Brandy Syndicate v. I. R. C. (1) ) whose outstanding knowledge of this subject was coupled with a happy conciseness of phrase in a taxing Act one has to look 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 eau only look fairly at the language used." In 1948 in the House of Lords, Lord Thankerton said: "Counsel are apt to use the adjective 'penal' in describing the harsh consequences of a taxing provision, but if the meaning of the provision is reasonably clear, the Courts have no jurisdiction to mitigate such harshness. On the other hand, if the provision is capable of two alternative meanings the Courts will prefer that meaning more favourable to the subject. If the provision is so wanting in clarly that no meaning is reasonably clear, the Courts will be unable to regard it as of any effect."
' Lord Halsbury said in Lord Advocate v. Fleming. '1 am only reiterating what has been said over and over again in dealing with taxing Acts, when I say we have no governing principle of the Act to look at; we have simply to go on the Act itself, to see whether the duty claimed is that which the legislature has enacted"; and in Tennant v. Smith, he said: In a taxing Act it is impossible, I believe, to assume any intention, any governing purpose in the Act except to take such tax as the statute imposes
(1) (1921) 1 K B 64 ' Cases, therefore, under the taxing Acts always resolve themselves into the question whether or not the words of the Act have reached the alleged subject of taxation". Lord Han worth M. R. Said: "Either in the clear words of a taxing statate the subject is liable or if he is not within the words, be is not liable". Again, in 1928 Lord Summer said: "The Crown does not tax by analogy but by statute," and earlier, in 1914, Lord Parker of Waddington said : "The Finance Act is a taxing statute and if the Crown claims a duty thereunder it must show that such a duty imposed by clear and unambiguous words". "It is not the function of a court of law t give to words a strained and unnatural meaning," said Lord Simonds, "because only thus will a taxing section apply to a transaction which, had the legislature thought of it, would have been covered by appropriate words." In I. R. C. v. Saunders Lord Reid said: "It is sometimes said that we should apply the spirit and not the letter of the law so as to bring in cases which, though not within the letter of the law, are within the mischief at which the law is aimed. But it has long been recognized that our Courts cannot so apply taxing Acts".
"Those cases which decided that taxing Acts must be construed with strictness," said Lord Carine in Pryce v. Monmouthshire Canal Co., "probably meant little more than this, that inasmuch as there was not any a prior liability in a subject to pay any particular tax, nor any antecedent relationship between the tax-payer and the taxing authority, no reasoning founded upon any supposed relationship of the taxpayer and the taxing authority could be brought to bear upon the construction of the Act, and therefore the taxpayer had a right to stand upon the literal construction of the words used, whatever might be the consequence.".
' The rule, while valuable as a caution, cannot be tagen as varying the ordinary rules for construing all statutes including taxing Acts. In Att.Gen. v. Carlton Bank, 34, Lord Russell of Killowen, C. J., said "I see no reason why any special canons of construction should be applied to any Act of Parliament, and I know of no authority for saying that a taxing Act is to be construed differently from any other Act. The duty of the Court is, in my opinion, in all cases the same whether the Act to be construed relates to taxation or to any other subject viz. To give effect to the intention of the legislature, as that intention is to be gathered from the language employed, having regard to the context in connection with which it is employed. The Court must no doubt ascertain the subject-matter to which the particular tax is by the statute intended to be applied, but when once that is ascertained its not open to the Court narrow or whittle down the operation of theAct by considerations of hardship or business convenience, or the like". The burden is, however, of course, on the Crown to show that the subject is within the provisions of the Act. Speaking of section 20(1)(c) of the Finance Act, 1922, Lord Greene M. R. Said the burden was on the Crown" to establish affirmatively that the income of a settlement is, not that it may be, payable or applicable to some period less than the life of the child".
6. At this stage principles of taxation the Constitutional system of Great Britain may be referred to as those would be of advantage, became the principals involved there have been adopted and incorporated in the Constitutional documents of the sub-continent. The Magna Carta of 1215C provided that merchants were not to be subject to unjust taxation. Petition of Rights, 1628, contained protest against taxation without the consent of Parliament. In the Bill of Right of 1688, it was laid down that "the levying of money for or to the use of the Crown by pretence of prerogative without grant of Parliament for longer time or in other manner that the same is or shall be granted is illegal". Thus, it came to be that no taxation was to take place without the consent of the Parliament and the conventions followed that taxation shall be effected by an Annual Finance Bill moved by the Crown and so certificated by the Speaker of the House of Commons. When that is passed by the House of Commons and agreed to by the House of Lords, then, that is presented for the Crown's assent whereafter it becomes law, The concurrence of the House of Lords has been whittled down by the Parliament Acts of 1911 and 1949. The present position is that a Finance Bill has to be moved in the House of Commons and after its passage through the House of Lords, it is placed before the Crown for assent whereafter it becomes law. Without legislation according to these provisions, no levy of tax is premissible under the British Constitution. These principles with necessary adaptations have been adopted in the various Constitutions of the sub-continent as stated above and also by the present Constitution of Pakistan. Thus, the financial requirements of the State in the form of revenue and expenditure are incorporated in an Annual Budget or Supplementary Budget which has to be passed by the Federal Legislature. In order to give effect to this, a Finance Act follows giving the details and amounts of taxation. The purpose of the Budget followed by a Finance A ctunder the British Constitutional system, serve two purposes firstly, that if the Government of the day fails to get the Budget and the Finance Act passed, or, even if a single cent is nut from the Budget, the Government cores to grief. A small cut in the Budgetary provisions is taken to amount to 'No Confidence" in the Government, obliging the latter either to resign or obtain fresh mandate and obtain a majority so as to get the Budget and the Finance Bill passed in order to govern. This forms the basis of the Parliamentary form of Government as established in Great Britain. It is the same system i,e, Parlimentary form of Government which has been adopted in the Constitution of Pakistan. Thus, it is essential that an Annual or Supplementary Budget is followed by a Finance Bill passed by the Federal Legislature and assented to by the President. If the Budget or the finance Bill are not passed, or, even a single paisa is cut, that is a clear indication of the facts that the Government had lost its majority in the Parliament and is bound to seek the same, A second salutary principle which follows from the above Constitutional provisions is that if the Budget followed by the Finance Bill is passed, then, that is a clear proof that the Government of the day is reposed confidence in governing the country and majority of the Members of the Parliament support the Government at the cost of their own and their Constitutent's purses. The system, thus, not only helps the Government to run the affairs of the State for the next year but also strengthens its, right to continue to govern. These are the reasons that in Great Britain, as well as in countries where Parliamentary form of Government functions, the Annual Budget Sessions is most crucial and important for Government as well as the Opposition. By reference to the background and tine Constitutional position in this behalf, the idea is to convey the conviction that taxation can only be done by the competent Legislature and the Legislature alone in accordance with the established and prescribed Constitutional manner. From this, it would follow that if the Parliament i,e, the Federal Legislature has not imposed a tax, the citizen is not obliged to pay and this would still be so, inspite of any mechanism or procedure for collection of taxes. Some decided cases of great value may be referred to governing interpretation of fiscal legislation. In the case of Bank Chettinad Ltd. v. Commissioner of Income-tax, Madras (1) the Privy Council observed at pages 526- 527 as under:- - "Their Lordships think it necessary once more to protest against the suggestion that in revenue cases" the substance of the matter" may be regarded as distinguished from the strict legal position. In Inland Revenue Commissioner v. Duke of Westminster, disapproval of this doctrine was expressed in the opinions of Lord Tomlin, and Lord Russell of Kilowen. A passage from the opinion of Lord Russell of Kilowen, at p. 24, may usefully be cited. It is as follows :- ' I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a Court's view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case. As Lord Cairns said many years ago in (1869) 4 H. L. 100, at. p. 122 ; "As I understand the principle of all fiscal legislation, it is this ; if the person to be taxed conies within the letter of the law he must be taxed however great the hardship may, appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of law the case might otherwise appear to be" In the case of D'avigdor Goldsmid v. In-land Revenue, Revenue Commissioner (1953) A C 347, the House of Lords held in the words of Viscount Simon on the Woolsack that" the liability of the subject under a taxing statute ought not to be arrived at by a course of subtle and sophisticated argument and, even in the case of the most learned judicial pronouncement, it is well to reoognizo that on rare occasions branus dormitant Homerus." In the case of Wijesuriva v. Amit (190) 3 All E R 72, the Privy Council, while interpreting the retrospective operation of a Taxing Act from Ceylon, observed as under...
' The question, therefore, remains whether the express provision of the amending Act was sufficient to bring about the result for which this Government contends. This question is to be determined according to the ordinary principles of construction which apply to a statute which is (a) retrospective, (b) fiscal and ( c) in part penal. It must be shown that the enacting words clearly cover the case to which it is sought to apply them. The Court will no doubt prefer an interpretation which gives effect to the amending Act, rather than one which derives it any efficacy, but it will not strain the language used, nor, will it rewrite or adapt it to cover cases other than those to which it clearly applies" In the matter of a Reference under section 213 of the Government of India Act, 1935, relating to Advisory Jurisdiction, the Federal Court of India in AIR 1944 FC 73 at 84-85 quoted with approval the dictum of Lord Macmillon in Privy Council case that" it may well be that provisions dealing merely with the machinery sections may be called in aid for the interpretation of the charging sections". From the above it would follow that if the Legislature has not imposed a tax, the subject shall not be liable to pay, or, suffer any consequence for non-payment. To this extent, the learned counsel for the petitioners is quite right.
(1) (1940) I T R 523 ' Therefore, the question would arise, as it does, that the demand of "additional amount of tax" for non-compliance with the various provisions of the Income-tax Act, 1922, is whether an imposition of tax or something else ; Now, tax can be imposed on income and nothing else. In the matter of the Finance Act (Northern Ireland), 1936 I T R 185, the Privy Council quoted at pages 188-189 with approval the dictum of Lord Macnaghten in the case of London Comity Council v. Attorney General.
The noble Lord had said that "Income Tax, if I may be pardoned for saying so, is a tax on income. It is not meant to be a tax on anything else. It is one tax, not a collection of taxes essentially distinct.
There is no difference in kind between the duties of Income-tax assessed under Schedule D and those assessed under Schedule A or any of the other Schedule of charge. One man has fixed property, another lives by his wits; each contributes to the tax if his income is above the prescribed limit. The standard of assessm ent varies according to the nature of the source for which taxable income is derived. That is all". In the case of the Commissioner of Income-tax, Karachi v. Mst. Khatija Begum, Partner, Shad! Impex, Karachi P L 0 1965 SC 472, the Supreme Court held toat" it is well established principle that the provisions relating to imposition of tax aie to be construed strictly and that if two interpretations are possible the one that favour the tax-payer must be adopted"
Therefore, if the learned counsel for the petitioners in all these cases is found to be correct that the demand of the additional amount of tax on the tax not paid or underpaid amounts to imposition of tax under the impugned provisions, then, those would have to be declared as un-Constitutional and without lawful authority. On the other hand, if the demand of the additional amount of tax for the tax unpaid or underpaid is not a tax, then, of course, the petitioners would be liable to the consequences provided for in the above quoted two impugned provisions. It is incontrovertible position that tax is imposed on "income". The latter term is not defined in the Act, though it is stated what it includes in section 2(6-C) of the Act. A reference to judicial precedents may be made at this point. In the case of the Commissioner of Income-tax, Bengal v. Shaw, Wallace and Company 136 I C 742, the Privy Council observed that "The object of the India Act is to tax "income", a term which it does not define. It is expanded, no doubt, into "income, property and gains" but the expression is more a matter of words than of substance. Income, their Lordships think, in this Act connotes a periodical monetary return" coming in" with some sort of regularity or expected regularly from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus, income has been likened pictorially to the fruit of a tree, or the crop of the field. It is essentially the produce of something which is often loosely spoken of as "capital". Their Lordships, further observed that "the sources from which the taxable income under the Act are to be derived are enumerated in section 6 which runs as under :- "Save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to Income tax in the manner hereinafter appearing, namely;
(f) Salaries.
(ii) Interest of securities.
(iii)Property.
(iv) Business.
(v) Professional earnings.
(vi) other sources!'
Therefore, the learned counsel for the petitioners is, again, right in sayin that the tax can be imposed on "income" and not on any thing else, much less on expenditure or tax, which is not an "income" but a liability. But all this does not solve the problem and help the petitioners. They are not being imposed a tax. What is happening to them is that for non. Compliance of the relevant provisions for paying the tax either in full or part, they are being asked to pay an additional amount. In other words, for withholding the amount which they were liable to pay, they are being told that for user of that amount or deprivation of the use of the same by the rightful owner i,e, the State, the person concerned must pay an additiona amount. Now, it is quite common in Civil Law that a person withholding somebody else's money and using the same or depriving the rightful owner of use, the former may be liable to make good the gain derived by him, or, suffer the loss which the rightful owner had undergone for not getting his money. Therefore, when the petitioners are asked to pay additional amount of tax for non payment of the tax contrary to law, they are not being imposed additional amount of tax on their income but are being asked to defray the liability for non-compliance of the law. The use of the phrase "additional amount of tax" and since that is calculable with reference to the non-paid or underpaid amount of the tax, gives an impression that the demand is of "additional amount of tax" on the non-paid or unpaid "tax", and that, no additional amount of tax can be levied on tax, the latter being not an income but an expenditure or liability.
Though the phrase "additional amount of tax" as a whole is loose and it would have sufficed to say that for non-payment or under-payment, the defaulting persons would be liable to pay "additional amount" without saying "of tax", yet, for an inaccurate or inapt phrase, the provision cannot be rendered nugatory. I am conscious of the fact and the law applicable to taxing statutes, as adumherated above, that a citizen is not to be made liable to pay a tax which the Legislature has not imposed and that no sophistry is to be employed in this behalf, and also of the fact that the interpretation, I put on the phrase "additional amount of tax", renders the last two words virtually redundant but clearly I am of this view also, that an inapt and inaccurate phraseology of the draftsman cannot and should not nullify a provision made by the Legislature which is consistent with existing legal F norms. A passage from Sweet and Maxwell, Eleventh Edition at page 221, based on sound judicial precedents, may be quoted in support of this view. It is to the following effect : "Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, by altering their collocation, or by rejecting them altogether, under the influence no doubt, of an irresistible conviction that the Legislature could not possibly have intended what its words signify, and that the modifications thus made are mere corrections of careless language and really give the true meaning. Where the main object and intention of a statute are clear, it must not be reduced to a nullity by the draftsman's unskilfulness or ignorance of the law, except in a case of necessity, or the absolute intractability of the language used."
' A concrete ease may be cited. Section 1 of the Carriers Act, 1830 provided that a carrier should not be responsible for the loss of certain articles delivered for carriage, in the absence of a declaration of their value and nature by the sender ''at the office" of the carrier. In Hart v. Baxendle (1) the words "at the office" were ignored, and section 1 was regarded as protecting the carrier where the parcel was delivered to his servant elsewhere than "at the office" and no declaration was made there or elsewhere, the paramount object of the legislature being that the carrier should in all cases be free from liability unless he was apprised of the nature and value of the thing entrusted to him.
7. In the present cases in hand, the Legislature is not imposing any new or fresh tax. What it is providing for is that for non-paying or underpaying the tax as required by the prescribed provisions, the defaulting party would be liable to pay an "additional amount" and the addition of two words at the end of phrase "of tax" are clearly unnecessary. For default in compliance of law and for withholding money due from the F rightful owner, obviously, the erring party can be burdened with financial obligations. This is quite normal under the general law. No exception can be taken in this behalf. At this stage reference may be made to the case of Zeenat Textile Mills (East Pakistan) Ltd, v. The Com-nissioner of Income-tax, Dacca Zone and another (2) in which demand of additional amount of tax under section 45-A of the Income-tax Act, 1922 has been held to be invalid and the learned counsel for the petitioners has rightly relied upon the same. Learned counsel for the respondents have stated that Leave to Appeal against this judgment had been granted by their Lordships of the Supreme Court of Pakistan and operation thereof has been stayed by their Lordships. However, the records are not available and the same might have been sent to Dacca registry. Be that as it may, the learned Division Bench of the Dacca High Court held that the "additional amount of tax" demanded from the then petitioners could not be justified as a penalty or interest, and being a tax on tax and not on income was not justifiable. However, as seen above the demand of additional amount of tax is not really an imposition of tax but only an additional liability for non-compliance with the relevant provisions of the Statute. Therefore, with respect, I beg to differ with their Lordships' conclusions in the retorted to case.
' Now, taking the other limb of the argument of the learned counsel for the petitioners that for non- payment or under-payment, a defaulting party is already liable to pay penalty prescribed under the Statute and, therefore, the present liability to pay additional amount of tax is not in accordance with the established law and is contrary to double jeopardy prohibition as contained in Article 13 of the Constitution, reference may first be made to some decided cases. In Murray R. Spies v. United States of America (3) it was observed that "the penalities imposed by Congress
(1) (1952) 6 Ex. 769 (2) PLD 1969 Dacca 673
(3) 317 U S (492-500).87 Law Ed. 496 ' to enforce the tax laws embrace both Civil and Criminal sanctions. The former consists of additions to the tax upon determinations of facts made by an administrative agency and with no burden on the Government to prove its case beyond a reasonable doubt. The latter consists of penal offences enforced by the Criminal process in the similar manner, Invocation of one does not exclude resort to the other".
' While interpreting Fifth amendment of the American Constitution, relating to the provision of doable jeopardy, Mr. Justice Brandeis, delivering the judgment of the U. S. Supreme Court in the case of Guy T. Helvering v. Charles E. (I), observed that "the Congress may impose both a Criminal and a Civil sanction in respect to the same act or omission, for the double jeopardy clause prohibits merely punishing twice, or attempting a second time to punish criminally, for the same offence" It was, further observed that" remedial sanctions may be of varying types. One which is characteristically free of the punitive element is revocation of a privilege voluntarily granted.
Forfeiture of goods or their value and the payment of the fixed or variable sums of money arc other sanctions which have been recognized as enforceable by Civil proceedings since the original revenue law of 1789. Inspite of their comparative severity, such sanctions have been upheld against the contention that they are essentially criminal and subject to the procedural rules governing criminal prosecution" To trace the genesis of the provision incorporated under Article 13 of the Constitution, one might refer to 5th amendment in the American Constitution which provided that no person shall be deprived of his person or limb twice over for the same offence. In the Indian and Pakistan Constitution, the provision is made that a person shall not be punished or prosecuted for the same offence twice over. Although these provisions appear to imply that it is the corporal punishment twice over which is being prescribed, but it stands established by judicial decisions of the highest order that for the same set of facts, a person shall not be made to suffer twice. What all this means, however, is that, for the same wrong, or, violation of law a person shall not be adjudged either in civil or criminal jurisdiction twice over. This does not mean that for a wrong, or, the violation of law, the person shall not suffer penal action and restitution or damages for the same default. In a case of say, misappropriation the defaulting person may be punished, as well as, made to return the money or goods with damages. In the present cases, what the petitioners are being asked, besides being imposed or subjected to imposition of penalty under section 28, is to pay additional amount of tax on non-paid or under paid tax contrary to law. This is in consonance with general law. As stated above, for withholding or using somebody else's money contra to law one can suffer penal action as well as return of the money with damages. This is exactly what has been done to the petitioners. They ar being required to pay an additional amount for the money withheld by them which they had to pay in accordance with the law, and, may also be asked to pay penalties or interest on that. No exception can be taken to these proceedings. The learned counsel for the petitioners has also referred to section 51(1-A) of the Income-tax Act in which it is provided that 'where any assessee furnishes under subsection (2) or subsection (3) of section 18-A an estimate of tax payable by him which he knew or bad reason to believe to be untrue, he shall be punishable with imprisonment which may extend to one year, or with fine which may extend to five
(1) 303 U S (391-406)=82 Law Ed. 399 ' thousand rupees, or with both". Learned counsel for the petitioners has contended that when the petitioners had already been imposed or are liable to be imposed penalty under section 28 and made to pay the additional amount, making them liable under section 51(1-A) amounts to double jeopardy. But this is not true. Section 5 l(1-A) provides for punishment when an assessee had furnished an estimate of tax payable by him which "he knew or had reason to believe to be untrue".
This quite obviously means that the person concerned is being punished for false statement and that this punishment has no reference to his liability for non-payment or under-payment. As observed above, the assessee was made liable to pay additional amount of tax, or penalty, for his default in not making the payment or making short payment contrary to law. Under the subsequent provision under discussion, he is being punished for furnishing an estimate of tax payable by him which he knew or had reason to believe to be "untrue" This is quite distinct from his earlier liability to pay his tax, or, consequences of default thereof. Thus, it appears that the contentions of the learned counsel for the petitioners that the impugned provisions are either invalid for lack of legislative competency or otherwise being in conflict with the relevant Constitutional provisions are not quite correct. Therefore, these petitions have no force and are, accordingly, dismissed. In the circumstances of the case, the parties shall bear their own costs.
' MUHAMMAD AFZAL ZULLAH, J.-I agree with my learned brother that these writ petitions be dismissed, but, with profoundest respects. I have not been able to agree on the reasoning. On the other hand, after carefully going through the judgment reported as Zeenat Textile Mills (East Pak.)
Ltd. v. The Commissioner of Income-tax, Dacca Zone and another (1). I respectfully agree with the reasons therein for coming to the conclusion that the 'additional amount of tax, levied through section 45-A of the Income-tax Act is illegal. Same considerations would apply to the levy of 'additional amount of tax' and 'additional tax, under subsections (6) and (8) of section 18-A of the Act. Accordingly, the same would also Tie illegal. Some of the other, additional grounds which, it appears, were not canvassed before their Lordships of the Dacca High Court, would be as follows :-
(i) The law relating to imposition of tax is to be construed strictly and if two interpretations are equally possible, the one that favours the tax-payer should be adopted. Moreover, unless it is a provision purely relating to recovery about which the principles of interpretation might be different, under a taxing statute, it would not be permissible to assume any particular intention other than that clearly conveyed by the words used in the statute. And in this behalf, the tax-payer has a right to rely upon the apparent construction of the words used. It is also necessary to appreciate that unless the State is able to bring the imposition within the letter of the law, it is not proper either to have resort to the process of mere inference analogy.
(II) In the specific provisions of sections 18-A and 45-A brought under challenge in these petitions, the expression used by the Legislature is "additional amount of tax". The words like penalty, interest and or compensation have been scrupulously avoided by the makers of the law. On the other hand, the longish expression "additional amount
(1) PLD 1969 Dacca 673 of tax" has been statutorily clarified as 'additional tax' when repeatin the concept in the last two provisos to subsection (6) and in subssec tion (8) where the purview itself contains the expression "additions tax". Thus, the Legislature on the one hand clearly omitted t use any expression conveying the meaning of penalty, interest o compensation ; on the other, used such expressions which clearly conveyed the concept of tax and taxation. Even the word "amount" as explained above, was omitted at places so as to make the meanin clear that it was a tax and nothing else.
(iii) Even if It be treated as an "additional, amount", the amount is of tax and not of interest, compensation or penalty as the Legislatur in its wisdom chose to use the word "tax" in preference to to other words.
(Iv) The history of legislation of, section 18-A shows that, initially, similar amount was recoverable as interest. The word "interest" was specifically used in the Act. There was considerable disparity between the two rates of interest under the same provision dealing with the same subject,- if the assessee retained the amount of certain N tax payable by him, he had to pay much higher rate of interest as compared to the Government for retaining non leviable depositlevy/tax. Examples were cited at the bar where the Government can recover almost double the amount of ordinary tax in the form of so called 'interest'. This might have created problems like those of equal treatment under the same law relating to compensation and interest. The Legislature, in its wisdom, changed the language of the statute and brought about the concept of additional tax in place of interest and thus was able to avoid legal complications. It may be noted here that while on the legislative side care was taken of the above problem, on the executive side, in the documents and the forms printed earlier the word "interest" was retained. But we have to look at the language used in the statute itself where clearly the word "tax" was preferred over interest.
(iv) It appears that the Legislature did not want to impose the impugned levy as a penalty because similar other penalty through ivaposition of amounts relatable to the tax payable, had already been levied. As a penalty, the Legislature had to allow certain amount of discretion to the authority imposing the penalty in so far as its measure was concerned but, if no discretion was to be left to the functionary, then the only way out was to ignore the concept of penalty and impose the levy as a tax.
(v) It was not seriously contested that the Constitution has not conferred on the Central Legislature any power to impose tax on an amount which, contrary to being income, is expenditure like payment of tax As is clear from subsection (6) of section 18- A, the 'additional amount of tax' impugned in these petitions was made payable by the assessee"upon the amount by which the tax so paid falls short . . . . " To the similar effect is the provision in section 45-A. Thus, the impugned levy is "upon" the "amount of tax" which is either not paid or short paid. This constitutional hurdle was the reason for the learned counsel for the respondents adopting the argument that the impugned levy was not a tax but is either interest or compensation or, in any case, penalty.
(vi) If it is not a tax on income and further if the levy, as explained above, is not permissible under the constitution, then the Constitutional bar cannot be overcome by extension of definition of "tax" in section 2(14) so as to include therein an additional tax" imposed on an amount of tax" not paid or short paid.
(vii) It is true that the definition of "tax", even before its latest amendment, included interest and penalty but that, by itself, would not change the nature of the levy. The extension of the definition so as to include interest and penalty is for a different purpose and not for treating the word "tax" wherever used in the statute as interest and/or penalty. If this were so, the substitution of the word "tax" with 'interest/penalty' in various provisions of the Act would end in startling results. Thus, where the word "tax" has been used it would have its ordinary meaning but the use of the words "interest" and "penalty" in the statute would not necessarily mean that they could not be treated as tax for certain purposes. Therefore, while interest and penalty, wherever used in the Act, if the context permitted, can be treated as tax, it is not possible to construe the use of word "tax" in subsections
(6) and (8) of section 18-A and section 45-A meaning as mere interest or penalty. This would amount to imputing intention to the Legislature not expressed in clear language, for which there is not enough justification. Moreover, the context of the provisions does not permit it and the definition, without any question, is subject to the context.
(viii) In any case, this is an example of two possible interpretations of a taxing law. The one favourable to the tax-payer is to be adopted.
2. For all the above summarised reasons and other considerations which weighed with their Lordships of the Dacca High Court in the case of Zeenat Textile Mills Ltd. I with respect, would have held that the impugned recovery not being permissible under the charging provisions of the Income Tax Act nor leviable under the Constitution is without lawful authority. But, for an unusual situation, I am unable to follow this course and pa order accordingly. During the hearing of these petitions, we were informed by the learned counsel for the respondents that same points having been raised before another Division Bench of this Court (Mushtaq Hussain and Gul Muhammad Khan, JJ in Writ Petition No, 1418 of 1971 (1) and several others, the petitions were dismissed. After hearing the arguments, we reserved the judgment. However, we soon verified that the information conveyed was correct and Writ Petition No, 1418 of 1971 wherein the question of "additional amount of tax" levied under section 45-A was involved had been dismissed. Thus, on the same point while, for me, on the one side there was a Division Bench judgment of Dacca High Court in the case of Zeenat Textile Mills Ltd. With the reasoning of which I agreed ; on the other, there was a very recent Division Bench ruling of this Court in which a contrary view had been taken. My learned brother also took the same view as of the Division Bench of our own High Court. In this situation therefore, when on the one side there was only a Division Bench view of Dacca High Court and on the other three learned Judges of this Court held a different view ; I, with respect, decided to point out my thinking on the point but, in deference to the majority view, decided to dismiss these petitions. I, accordingly, for this reason, dismiss these petitions.
' There shall be no order as to costs.