Additional Commissioner of Income Tax vs M.G. Husain Ghiya

S.K. Desai, J.—This reference is at the instance of Mustakhusain Gulam Husain Ghiya and we the Additional Commissioner. The assessee is are concerned with the assessment year 1963-64. The assessee was a resident of Daman, which was originally a Portuguese territory. In the year of account, the assessee had income not only in the territory of Daman but also in Bombay. The total income of the assessee finally determined as a result of the decision of the Tribunal came to Rs. 6,66,279, out of which Rs. 4,65,700 was held to be income accrued and received at Bombay and the balance of Rs. 2,00,569 was held to be income accrued and received in Daman. It may be mentioned that a reference was sought by the Commissioner from the decision of the Tribunal in quantum appeal and this reference being IT Reference No. 178 of 1973 was disposed of by a Division Bench of this Court on 16-6-1982.

As the assessee had not filed a return of income u/s 139(1) of the income tax Act, 1961 (''the Act''), the ITO initiated proceedings u/s 274 of the Act, and imposed on the assessee a penalty of Rs. 3,43,140. The assessee carried the matter in appeal to the AAC. The AAC directed a small relief to be given to the assessee but did not specify the exact figure. In other words, the AAC only directed that penalty should be recalculated after giving effect to his appellate order in quantum appeal. However, the AAC upheld the revenue''s contention that the assessee was liable to pay penalty u/s 271(1)(a) of the Act.

The assessee then took up the matter before the Tribunal. It was urged on behalf of the assessee that the assessee was a person residing in Daman and he had no place of business outside the erstwhile Portuguese territory. It was submitted that the assessee was not fully aware, of his tax liability, and therefore, penalty ought not to be imposed. In the alternative it was urged that in view of paragraph 17 of the Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions) Order, 1964 (''the Taxation Concessions Order''), it was not necessary to impose the minimum penalty and that the penalty should be reduced to a token amount. It was submitted on behalf of the department that para 17 of the Taxation Concessions Order was not applicable as the assessee had income which accrued or arose in Bombay. On these contentions the Tribunal accepted the alternative submission made on behalf of the assessee. The Tribunal construed paras 3 and 17 of the Taxation Concessions Order and opined that whilst in para 3 the scope of benefit was restricted only to income that accrued or arose in the erstwhile Portuguese territory there was no such restriction to be found in para 17. The Tribunal, therefore, held that the assessee was entitled to relaxation contemplated in para 17 of the Taxation Concessions Order and that it was a suitable case where the relaxation ought to be invoked. The Tribunal, accordingly, reduce the penalty to Rs. 1,000.

At the instance of the Additional Commissioner, the following three questions stand referred to us :

Whether, on the facts and in the circumstances of the case, the assessee was one of the persons described in para 3 of sub-para (1), clause (i), sub-clause (a), as well as clause (ii) of Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions) Order, 1964 ?

Whether, on the facts and in the circumstances of the case, the assessee was entitled to the benefits contemplated in para 17 of the Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions) Order, 1964 ?

If the answer to Question No. 2 is in the affirmative, whether the concession is available for income received or deemed to be received in Bombay ?

It may be mentioned that the Additional Commissioner also wanted the Tribunal to refer to the High Court another question on the aspect, whether the penalty should have been reduced to Rs. 1,000. The Tribunal rejected the application observing that no question of law was involved in the proposed question. The matter was not carried further by the Additional Commissioner.

As far as Question No. 1 is concerned, the answer to be given is fairly obvious on the factual material before us. We have also scrutinised the decision of the Division Bench in IT Reference No. 178 of 1973. The said decision has proceeded on the footing that the assessee was one of the persons covered under clause (ii) of sub-para (1) of para 3 of the Taxation Concessions Order. We must, accordingly, answer Question No. 1 in the affirmative and in favour of the assessee.

If the provisions of clause (ii) of sub-para (1) of para 3 of the Taxation Concessions Order are analysed, one would require to agree with the counsel for the Commissioner that the provisions of paras 5 and 6 of the Order are to apply only to so much of the income of the assessee included in his total income as accrues or arises in the Union territory or outside India and is not deemed to accrue or arise or is not received or is not deemed to be received in any part of India other than the Union territory. However, even if we find these express words of limitation in clause (ii), is there any warranty for reading them in the provisions contained in para 17 of the Taxation Concessions Order.

Para 17 pertains to relaxation of provisions relating to imposition of penalties under the Act. It is a short para and the entire para may, accordingly, be set down.

Relaxation of provisions relating to imposition of penalties under the income tax Act, 1961 :

Notwithstanding anything contained in Chapter XXI of the income tax Act, 1961, the income tax Officer, the Inspecting Assistant Commissioner or the Appellate Assistant Commissioner who is authorised to impose a penalty under any provision of that Chapter, may in the case of an assessee referred to in sub-clause (a) of clause (i) or in clause (ii) of sub-para. (1) of paragraph 3 of this Order, impose a penalty of an amount which is less than the minimum amount specified in any such provision :

Provided that the provisions of this paragraph shall not apply in relation to an assessment for any assessment year commencing on or after the 1st day of April, 1967.

The only question, which in our opinion is required to be posed and answered whilst considering the case of impugned action under para 17 is, whether the assessee who has been given the benefit of the relaxation was an assessee referred to in sub-clause (a) of clause 1 or clause 2 of sub-para (1) of para 3 of the Taxation Concessions Order ? We have already answered this question in the affirmative. If that be so, we have to hold further that the relaxation contemplated in para 17 was available in his case and the taxing authority was entitled to impose a penalty of an amount which is less than the minimum amount specified in any of the provisions for imposition of penalties under the Act. The only words of limitation are to be found in the proviso to para 17 which does not permit the relaxation being available for any assessment year commencing on or after 1-4-1967. As we are concerned with the assessment year 1963-64 and as we have opined that the assessee was one of the persons fully covered by clause (ii) of sub-para (1) of para 3, the relaxation was available. We find in para 17, no other words of qualification, restriction or limitation on the amount of penalty which could be levied. Mr. Joshi has strenuously contended that the relaxation contemplated in para 17 should only be available on the penalty which could be calculated on the income, which had been earned by or accrued to the assessee in the erstwhile Portuguese territory and, not on the penalty quantum on the income which had accrued to the assessee in India. He submitted that the intention of the Legislature was clearly to give benefit in respect of that income and not to the income earned by an assessee in India. However, we find clear words of limitations conforming to such intention in the relevant provisions contained in para 3; on the other hand, no such words of limitation or restriction or qualification are to be found in para 17. It is not permissible for the Court to rewrite the statutory provisions in order to give effect to an assumed intention of the Legislature. The relaxation contained in para 17 (apart from the proviso) is wide and extensive and not limited to a part of the penalty or a portion of the penalty calculated with reference to the income earned from the erstwhile Portuguese territory. The relation would seem to apply to the total penalty levied. It is true that in the instant case, one does not feel that the reduction to a token amount was either fairly or fully justified but, this is not the subject-matter of the question of law referred to us. In our opinion, the answers to be given to the remaining two questions are obvious and no further discussion is called for. In the result Question Nos. 2 and 3 are answered as under :

Question No. 2 : In the affirmative and in favour of the assessee.

Question No. 3 : Relaxation contemplated in para 17 was available in respect of the entire penalty irrespective of whether the penalty was calculated on the basis of the income received or deemed to be received in Bombay or income received or deemed to be received in the erstwhile Portuguese territory.

The Commissioner will pay the costs of the reference to the assessee.