# THE COMMISSIONER OF INCOME-TAX, WEST BENGAL I, CALCUTTA v. MIS. VEGETABLES PRODUCTS LTD

- **Citation:** [1973] 3 S.C.R. 448
- **Court:** Supreme Court of India
- **Decided:** 1973-01-29
- **Bench:** K. S. Hegde, P. Jaganmohan Reddy, H. R. Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-commissioner-of-income-tax-west-bengal-i-calcutta-v-mis-vegetables-products-5828
- **Pages:** 6

## Headnote

Income Tax Act (43 of 1961), ss. 143, 156 and 21l(l)(a)(i)-
Penc..-lty-Whether related to tax assessed or tax payable.
The assessee failed to furnish the return of its- income within
the
time allowed but submitted the return after a notice under s. 28(3) of
the J;ncome·tax Act, 1922, was served on him.· A provisional
assess·
ment was made by the lncome·tax Officer under s. 23B of the 1922-Ac!
and the assessee· deposited the amount. The Income-tax
Act,
1961,
having come into force thereafter. the Income-tax Officer completed the
assessment under the provisions of that Act, determined the
tax
due
and the penalty payable by. the asscssee.
In doilllg so, he did not take
into consideration the amount deposited by the asses.see, that is, he
took into consideration not the amount ·demanded under s. 156 of the
1961-Act but the amount assessed under s. 143. The Appellate Assista:nt Commissioner confirmed the order; but the Tribunal held that the
penalty under s. 271 (1 )(a)(i) is to be levied on the t~x assessed minus
the amount paid under the provisional assessment order, and the High
Court, on refe're(lce, agreed with the Tribunal.
Dismissing the appeal by the Revenue to thi& Court,
HELD : ( 1) The acceptance of one or
the
other ijnterpretation
sought to be placed on s. 271(1)(a)(i) by the parries would lead to
some inconvenient result; but the duty of_ the Court is to. read the
section, understand its language and give ,effect to it. If the language
is plain, the fact that the consequence of gMng effloct to it may lead
to some absurd result is not a factor t'o be taken into
account
in
interpreting a provision.
It is for the Legislature to step in and remove
the absu'rdity.
On the "Other hand, if two reasonable constructions
of
a taxing provision are possible that construction which
favours
the
assessee must be adopted.
[451D-F]
(2) Section 271(J)(a)(i) stipulates that the Income-tax Officer may
direct ti1at the assessee shall pay by way of penalty, "in addition to
the amount of tax, if any, payable by' him a sum equal to two per cent
of the tax for everv month ............ "
Qua:Mifiootion of the
tax
payable is always refefred to in the Act as .a tax "assessed". A tax
payable is not the same thing as tax assessed.
The tax payable is that
A'lmovnt for which a demand not_ice is issued
under
s. 156. Hence,
there can be no doubt that the -expression 'the amount of tax, if any,
payable by him' referred to in the first part of the section refers to
the tax payable under a demand ;notice. The definite article
'the'
in
the words "the tax" in the lattet pal-! of the provision, shows that
it refers to the tax, if any, payable by the assessee-, mentioned in the first
part of the section.
[452D-G; 453A-B]
(3) At any rate, the provision is capable of more tOOn one reasonable
interprietation, and since the provisiqn, is not merely a taxproyision
but a penalty provision as well the interpretation in
favour
of the
assessee must be accepted.
[453B-D]
c:
D
E
H
A
ll
c
D
E
F
G
H
C.I.T. v. VEGETABLE PRODUCTS (Hegde, J.)
449
M. M. A.nnaioh v. Commissioner of Income-tax, Mysore, 76, I.T.R ..
582, approved.
Vir Bhan Bansi Lal v. Commissioner of
Income-tax,
Punjab,
6
J.T.R. 616 and Commissioner of Income-tax,
Delhi
v.
Hindustan
Industrial CorpOTation, 86 I.T.R. 657, disapproved.
CJv1L APPELLATE JURISDICTION : Civil Appeal No. 497 of
1970.
Appeal by Certificate from the Judgment and order date June
26, 1969 of the Calcutta High Court in Income-tax Reference No.
145 of 1966.
S. C. Manchanda, T. A. Ramachandran,
S. P. Nayar and
R. N. Sachthey, for the appellant.
B. Sen, S. Sadhu Singh, J.M. Khanna ·and S. Ramachandran,
for the respondent.
S. V. Gupte, T. S. Viswanatha Rao and A. T. M. Sampat, for
the intervener.

## Text

THE COMMISSIONER OF INCOME-TAX, WEST BENGAL I,
CALCUTTA
v.
MIS. VEGETABLES PRODUCTS LTD.
A
January 29, 1973
B.
[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA JJ.]
Income Tax Act (43 of 1961), ss. 143, 156 and 21l(l)(a)(i)-
Penc..-lty-Whether related to tax assessed or tax payable.
The assessee failed to furnish the return of its- income within
the
time allowed but submitted the return after a notice under s. 28(3) of
the J;ncome·tax Act, 1922, was served on him.· A provisional
assess·
ment was made by the lncome·tax Officer under s. 23B of the 1922-Ac!
and the assessee· deposited the amount. The Income-tax
Act,
1961,
having come into force thereafter. the Income-tax Officer completed the
assessment under the provisions of that Act, determined the
tax
due
and the penalty payable by. the asscssee.
In doilllg so, he did not take
into consideration the amount deposited by the asses.see, that is, he
took into consideration not the amount ·demanded under s. 156 of the
1961-Act but the amount assessed under s. 143. The Appellate Assista:nt Commissioner confirmed the order; but the Tribunal held that the
penalty under s. 271 (1 )(a)(i) is to be levied on the t~x assessed minus
the amount paid under the provisional assessment order, and the High
Court, on refe're(lce, agreed with the Tribunal.
Dismissing the appeal by the Revenue to thi& Court,
HELD : ( 1) The acceptance of one or
the
other ijnterpretation
sought to be placed on s. 271(1)(a)(i) by the parries would lead to
some inconvenient result; but the duty of_ the Court is to. read the
section, understand its language and give ,effect to it. If the language
is plain, the fact that the consequence of gMng effloct to it may lead
to some absurd result is not a factor t'o be taken into
account
in
interpreting a provision.
It is for the Legislature to step in and remove
the absu'rdity.
On the "Other hand, if two reasonable constructions
of
a taxing provision are possible that construction which
favours
the
assessee must be adopted.
[451D-F]
(2) Section 271(J)(a)(i) stipulates that the Income-tax Officer may
direct ti1at the assessee shall pay by way of penalty, "in addition to
the amount of tax, if any, payable by' him a sum equal to two per cent
of the tax for everv month ............ "
Qua:Mifiootion of the
tax
payable is always refefred to in the Act as .a tax "assessed". A tax
payable is not the same thing as tax assessed.
The tax payable is that
A'lmovnt for which a demand not_ice is issued
under
s. 156. Hence,
there can be no doubt that the -expression 'the amount of tax, if any,
payable by him' referred to in the first part of the section refers to
the tax payable under a demand ;notice. The definite article
'the'
in
the words "the tax" in the lattet pal-! of the provision, shows that
it refers to the tax, if any, payable by the assessee-, mentioned in the first
part of the section.
[452D-G; 453A-B]
(3) At any rate, the provision is capable of more tOOn one reasonable
interprietation, and since the provisiqn, is not merely a taxproyision
but a penalty provision as well the interpretation in
favour
of the
assessee must be accepted.
[453B-D]
c:
D
E
H
A
ll
c
D
E
F
G
H
C.I.T. v. VEGETABLE PRODUCTS (Hegde, J.)
449
M. M. A.nnaioh v. Commissioner of Income-tax, Mysore, 76, I.T.R ..
582, approved.
Vir Bhan Bansi Lal v. Commissioner of
Income-tax,
Punjab,
6
J.T.R. 616 and Commissioner of Income-tax,
Delhi
v.
Hindustan
Industrial CorpOTation, 86 I.T.R. 657, disapproved.
CJv1L APPELLATE JURISDICTION : Civil Appeal No. 497 of
1970.
Appeal by Certificate from the Judgment and order date June
26, 1969 of the Calcutta High Court in Income-tax Reference No.
145 of 1966.
S. C. Manchanda, T. A. Ramachandran,
S. P. Nayar and
R. N. Sachthey, for the appellant.
B. Sen, S. Sadhu Singh, J.M. Khanna ·and S. Ramachandran,
for the respondent.
S. V. Gupte, T. S. Viswanatha Rao and A. T. M. Sampat, for
the intervener.
The Judgment of the Court was delivered by
HEGDE, J.-This appeal by certificate arises from the decision
of the Calcutta High Cou~t in a case stated by the Income-tax
Appellate Tribunal, 'B' Bench, Calcutta.
After setting out the
relevant facts, the Tribunal solicited the opinion of the High Court
on the following question of law :
'Whether on the facts and in the circumstances of
the case, the Tribunal was right in holding tha1t in calculating the penalty leviable under section 271 (I) (a)
(i) of. the Income-tax Act, 1961 the amount paid by
the assessee under the provisional assessment under section 23B of the Indian Income-tax Act, 1922, was to
be deducted from the amount of tax determined under
section 23 (2) of that Act in order to determine the
amount of tax on which the computation of the penalty
was to be based and in reducing the amount of the
penalty imposed on the assessee to Rs. 2,737 /-."
The High Court answered that question in the affirmative and
in favour of the assessee.
Aggrieved by that decision, the Commissioner has brought this appeal.
Let us now. proceed to state the facts relevant for deciding
the point in issue, as could bl: gathered from the statement of the
case.
In Ibis case we are concerned with the assess's assessment for
the assessment year 1960-61, the relevant account year ending on
December 31, 1959. In that regard the Income-tax Officer issued
a notice under s. 22(2) of the Indian Income-tax Act, 1922 (ro
be hereinafter referred to as the "1922 Act") on June 1, 1960.
The same was served on the assessee on June 13, 1960 .. That
notice required the assessee to submit its return on or before July
~50
SUPREME COURT REPORTS
[1973] 3 s.c.R.
1~, 1960. On July 18, 1960, the assessee moved for extension
oi time for submitting its return.
The Income-tax Offi~er extended the time by two months and at rthe same time the informed
the assessee that no fuI'ther time would be allowed. The assessee
failed to furnish its return within the extended time.
Thereafter
a notice under s.28(3) of the 1922 Aot was served on the assessee
on January 16, 1961. On the very next day viz. January 17,
1961, the assessee filed its return for the assessment year in question.
The assessment was completed by the Income-tax Offii;er
only on October 31, 1962.
Meanwhile on April 1, 1961 jhi:
Income-tax Act, 1961 to be hereinafter referred to as the "A.ct")
came into force. As under the provisions of s.297(2)(g) of the
Act, the proceedings for the imposition of the penalty jlad to be
initiated and completed under the Act, a fresh notice under s.
27 4 (I) of the Act was served on the assessee.
The assessee
objected to the validity of the notice but that objection was overruled. At present we are not concerned with that objection. We
are also not concerned with the other objections
tal>:en by tjle
assessee which were negatived by the Tribunal. The lμcome-t~x
Officer determined the tax due frorn the assessee for the assesswem
year at Rs. 1,25,512/10 P. and on that basis, th,e penalty pay~~le
by the assessee was fixed at Rs. 12,734/10 P. At this stagl_l' it may
l:>e mentioned that on February 2,1961, a provisional assess!llellt
was made by the Income-tax Officer under s. 23B of the j 922 Act.
Immediately thereafrer the assessee deposited Rs. 92)94/55 · }l.
In determining the penalty due from the assessee, th<? Income-tax
Officer took into consideration not the a~qu11t llenianded under
s. 156 oi the Act but the amount assessed under s. 143 of the Act.
In appeal, the Appellate Assistant Commissioner confirmed the
order of the Income-tax Officer. On a further appeal, the Tribunal
came to the conclusion that the penahy under s.271 (I )(a)(i) is
to be levied on the tax assessed minus the amount paid under the
provisional assessment order namely Rs. 92,294/55 P.
On the
biasis of that finding, it determined the penalty p;iyable by the
assessee at Rs. 2,737 /44 P. The conclusion of the Tribunal was
accepted as correct by the High Court.
Learned Counsel for the Revenue, Mr. Manchanda contended
A
B
c
E
F
that on a proper construction of s. 27l(l)(a)(i) it would be
G
seen 1that the penalty had to be determlnod on the basis of the tax
assessed under s. 143 of the Al;¢.
Counsel urged that if that is
not the true construction then. the effectiveness of the section may
be taken away by the assessee paying the tax due by him a day
before the demand notice is serv«l<i on him.
In support oi the
interpretation placed !)y him, Mr. Manchanda relided on the deciff
sions of the Lahore l{igh Court in Vir Bhan Bansl Lal v. Commissioner of Income-tax, Puniab(') and the decision of the Delhi
6 1.T.R. 616.
A
B
c
C.I.T. v. VEGETABLE PRODUCTS (Hegde, /.)
451
High Court in Commissioner of Income.tax, Delhi v. Hindustan
Industrial Corporation('). The Delhi High Court followed the
decision of the Lahore High Court. On the other hand, it was
urged by Mr. B. Sen, learned Counsel for the assessee and Mr.
S. V. Gupta, learned Counsel for the interveners that on a proper
interpretation of the provision mentioned earlier, it would be clear
that the penalty can be only imposed on the amount payable
under s. 156. In suppoll\ of their contention, they relied on the
decision oi the Mysore High Court in M. M. Annaiah v. Commissioner of Income-tax, Mysore.('). They further urged that if
interpretation placed by the Revenue on s. 2 71 ( 1 )(a) ( i)
is
accepted as correct, the result would be that the advance tax paid
or taxes deducted at the source cannot be taken into consideration
in determining !be penalty payable. If that be true, the Counsel
urged that even if the assessee had paid more tax than he need
have paid, but had not submitted his return within the time fixed,
he would be liable to pay penalty on the entire amount assessed.
According to them the law cannot be presumed to be so harsh at
that.
There is no doubt that the acceptance of one or the other inter·
pretation sought to 1?e pla~ on s. 271(l)(a)(i) bly the parties
woμld lead ito some mconveruent result, but the duty of the court
!$ fu read the sectio11, understand its langtiage and give effect to
the same. I( the language is plain, the fact that the consequence
qf'giyiμg elj'ect to it may lead to some absurd result is not a factor
tfl J:1e taken into acC!)unt in interpreting a provision. Jit is for the
1egis1ature to step in and remove the ab5urdity. On the other han\f,
it ·two reasonable constructions of a taxing provision are possible
thafc(lllStnictiOll which favours the as5essee must be adopted This
1~ a well acc~pt¢ :iJle of constniction recognised by thi~ '(::ourt
J1l severM of lf$ ~ec1S1ons. Hence a\l that we have to see 1s, w~a'I
'
is the trut:. ~~t pf. !he language e~ployed in s. 271 (1 )(a)(1).
¥ we find tha\ liinguage to be iirob1p;uous pr capable of more
m~!IJllngs ~han oμe, then We have to adopt that interpretatioq which
f!miμrs the assessee, more particμlarly so b~cause the provision
r~\l\tes ~P impa5ition pf penalty.
Let μs 11ow rell\l section 211(\)(a)(i). The section to the
extent material flw· our prese11t purpose rea~ :
"If the Income-(ax Officer or the Appellate Assistant
Commissioner in the course of any proceedings under'
this Act, is satisfied that any person-
( a) has without reasonable cause failed to furnish
the return of total income which he was required
to furnish. . . . . . by notice given under
su~
(I) 86. I.T.R. 657.
(2) 74 I.T.R. 582
452
SUPREME COURT REPORTS
[1973] 3 S.C.R.
section(2) of section 139 ...... or has without
reasonable cause failed to furnish it within the
time allowed and in the manner required ....
by such notice he may direct that such person
shall pay by way of penaky,-
( i) in the cases referred to in clause (a) , in
addition to the amount of the tax, if any,
payable by him a sum equal to two per cent,
of the tax for every month during which the
default continued, but not ex9CedinJ1: in the
aggregate fifty per cent, of the tax."
(emphasis supplied)
Section 271 ( !) ( a)(i) slipulates that the Income-tax Officer
may direct that the assessee shall pay by way of penalty, in cases
similar to the one that we are considering "in addition to the amount
of the tax, if ariy, payable by him a sum equal lo 2 per cent of
the tax for every moll'th during which the! default continued but not
exceeding in the aggregate 50 per cent of the tax''.
We must firs! determine what is the meaning of the expression
"the amount of the tax, if any, payable by him" ins. 271 (1 )(a) (i),
Does it mean the ·amount of tax assessed under s. 143 or the amount
of tax payable under s. 156. The word "assessed" is a term often
used in taxation laws. It is used in several provisions in the Act.
Quantification of the tax payable is always referred to in the Act
as a tax "assessed". A tax payable is not the same thing as tax
assessed.
The tax payable is 'that amount for which a demand
notice is issued under s. 156. In deterrnininJ!: the tax payable, the
tax already paid has to be deducted. Hence there can be no doubt
that the expression "the amount of 1he tax, if any, payable by
him" referred to in the first part of s. 271(1) (a)(i) refers to the
tax payable under a demand notice. We next come to the question
what is the meaning to tie attached to the words "the tax" found
in the laHer part of that provision. It may be noted that the expression used is not "tax" but "the tax". The definit~ article "the"
must have reference to something said earlier. It can only refer
to the tax. if any, payable by the assessee mentioned in the first
part of s. 271(1)(a)(i). It is true the expression "tax" is defined
in s. 2 ( 43) thus :
" "tax" in relation to the assessment year commencing on the 1st day of April, 1965 and any subsequent
assessment year means income-tax chargeable under the
provisions of this Act. and in relation to any other assessment year income-tax and super-tax chargeable under
the provisions of this Act prior to the aforesaid date."
A
B
c
D
E.
G
H
A
B
c
D
C.l.T. v. VEGETABLE PRODUCTS (Hegde, J.)
453
But the difficulty in this case is, as mentioned e_arlier the expression used is not "tax" but "the tax". That expression can ~
reasonably understood as referring to the expression earlier used
in the provision namely "the amount of the tax, if any payable" by
the assessee. At any rate, the provision in question is capable of
more than one reasonable interpretation. Two High Courts namely
Calculla and Mysore have taken the view that the expression
"the tax" ins. 271(1)(a) (i) refers to "the tax, if any, payable"·
(by the assessee) mentioned in the earlier part of .the section. It
is true that Lahore and Delhi High Courts have taken a different
view.
But the view taken by the Calcutta and Mysore High·
Courts cannot be said to be untenable view. Hence, particularly
in view of the fact that we are interpreting, not merely a taxing
provision but a penalty provision as well, the interpret~tion placed'
by the Calcutta and Mysore
High Courts cannot be rejected.
Further as seen earlier, the consequences of accepting the interpreta1ion placed by the Revenue may lead to harsh results.
!'er the reasons mentioned .above, this appeal is dismissed with•
costs.
V.P.S.
Appeal dismissed;
-