The Commissioner of Taxes, East Zone, Dhaka
M/s. Mallick Brothers,
F. K. M. A. Munim CJ
Badrul Haider Chowdhury J
Shahabuddin Ahmed J
The Commissioner of Taxes, East Zone, Dhaka………….Appellants
M/s. Mallick Brothers ……………………..Respondent
Dec. 11, 1985.
The INCOME TAX ACT (II OF 1922) S. 18
Another notice for the purpose of section 18 (1) has not been provided for, inasmuch as, it is the continuation of the same proceeding and not a different proceeding. The High Court Division erred in law in taking the view that a separate notice is required for imposing additional tax under section 18 (a). The appeals are allowed.
Cases Referred to-
Commissioner of Income Tax vs. Fazlur Rahman (1964) 16 DLR (SC) 506; Badridas Daga vs. Commissioner of Income Tax 1949 I.T.R. 202.
A. M. Mahmudur Rahman, Senior Advocate, instructed by Md. Sajjadul Huq, Advocate-on- Record—For the Appellant.
Chowdhury Ramzan All, Advocate, instructed by Abu Backkar, Advocate-on-Record —For the Respondent.
Civil Appeal Nos. 115-119 of 1984.
(From the Judgment and Order dated 8.1.84 & 10.1.84 passed by the High court Division, Dhaka in Application Nos. 6 7, 8, 9 and 10 of 1981.)
Badrul Haider Chowdhury J.—These five appeals by special leave are directed against the judgment and order passed by the Division Bench of the High Court Division in Application No. 6 of 1981.
2. The Commissioner of Taxes, East Zone, Dhaka, filed an application under section 66(1) of the Income Tax Act and the question of law was framed thus:
”Whether on the facts and circumstances of the case the Tribunal was justified in allowing the appeal setting aside the order of the Appellate Joint Commissioner as well as of the Deputy Commissioner under section 18A imposing additional amount of tax and whether notice under section 23(2) of the Income Tax Act as sufficient for the purpose of determining additional tax under section ISA of the Income Tax Act.”
3. In this case, the Deputy Commissioner of Taxes found that the assessee did not comply with the provision of section ISA of the Income Tax Act. Upon the total income of the assessee, the Deputy Commissioner charged an additional amount of tax of Tk. 4,689/-. The assessee filed an appeal before the Appellate Joint Commissioner of Taxes and it was dismissed. The assessee then preferred an appeal before the Income Tax Appellate Tribunal. The majority decision of the Tribunal was that a fresh notice ought to have been served upon the assessee before imposing additional taxes under section 18A of the Income Tax Act. In this background, the Revenue filed this application under section 66(1) of the Act and framed the question as mentioned above.
4. The learned Judges of the High Court Division took the view that a fresh notice was necessary and grounded such opinion on the principle of natural justice. The learned Judge observed.
“We hold that in order to levy additional tax u/s. 18A of the Income Tax Act fresh notice is necessary because of the fact that the mode of levying of tax u/s. 23(3) and u/s. 18A are completely different. The principle of natural justice also demand that while levying additional tax u/s. 18A (6) and (8) of the Income Tax Act notices are to be served upon the assessee to show cause why the additional tax shall not be levied against the assessee.”
Leave was granted to consider to correctness of the proposition of law laid down by the High Court Division.
5. Mr. A. M. Mahmudur Rahman learned Counsel, appearing for the appellant contended that the High Court Division erred in law in taking the view “the modes of levying of tax under sections 23(3) and ISA are completely different”. The learned Counsel contended that section 184 is not an independent proceeding apart from regular assessment under sub-section 23(3) and as such no fresh notice is required for levying additional taxes. It was non tended that additional tax is to be determined on the basis of regular assessment for which notice under sub section (2) of section 23 had already been served.
6. Mr. Chowdhury Ramzan Ali, learned Counsel, appearing for the respondent attempted to justify the view of the High Court Division by citing a decision Commissioner of Income Tax Vs Fazlur Rahman (1964) 16 DLR (SC) 506; PLD 1964. S.C. 410 which was given under section 33A of the Act and further pointed out the provision of section 29 which postulates the issuance of notice.
7. The aforesaid decision has no manner of application as it was given under section 33A and it was held that the opportunity of hearing should be given to the assessee otherwise the proceeding would be void and of no legal effect. Section 23(2) provides that the Deputy Commissioner of Taxes may issue notice upon the assessee “requiring him on a date to be therein specified either to attend at the office or to produce any evidence”.
Then sub-section (3) reads as follows:—
“On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, the Deputy Commissioner of Taxes, after hearing such evidence as such person may produce and such other evidence as the Deputy Commissioner of Taxes may require, on specified points shall, by an order in writing assess she total income of the assessee and determine the sum payable by him on the basis of such assessment.”
Sub-section (4) provides if the assessee fails to make the return required by law or fails to comply with the terms of notice etc., the Deputy Commissioner of Taxes shall make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. Section 18A (8) reads as under:
“Where, no making the regular assessment, the Deputy Commissioner of Taxes finds that payment of tax was not been made in accordance with the foregoing provisions of this section, additional tax calculated in the manner laid down is sub-section (6) shall be, added to the tax as determined on the basis of the regular assessment.
8. Section 18A has a little history. It provides for advance payment of tax. It was inserted in 1944. The principle of section is the principle of “pay as you earn” that is pay tax by installment in respect of the income of the very year in which the tax paid. But this section cannot directly levy tax on the income of the assessment year. The advance payment of tax is only provisional and if after the regular assessment is made the tax paid in advance is found to be in excess of the tax payable, the assessee would be entitled to refund of such tax. Vide section 23B (6)(7). Income is assessed and tax payable is determined under section 23. Assessment may be made (i) on the basis of the return, (ii) on the basis of the evidence adduced and (iii) to the best of the Income Tax Officer’s judgment, which is called best judgment assessment. The Privy Council pointed out in Badridas Daga V. Commissioner of Income Tax, 1949 ITR. 209 that assessment refers primarily to the computation of the amount of income. Section 18A(8) opens up by saying “where on making the regular assessment the Income Tax Officer finds that no payment of tax has been made in accordance with the provision of section 18A additional tax calculated in the manner laid down in sub-section(6) “shall be added to the tax as determined on the basis of regular assessment. (Emphasis added).The learned Judges of the High Court Division unfortunately overlooked the crucial expression in sub sec. (8), namely, “shall be added to the tax as determined the basis of the regular assessment.” Once regular assessment is completed under section 23 then the Deputy Commissioner of Taxes is under statutory obligation to work out the additional tax that is payable if the same has not been paid already. He will calculate it in the manner laid down in sub-section (6) and the total amount shall then be added to the tax on the basis of the regular assessment. Notices are to be given under Section 23(2) and also under other sections of the Income-tax Act. The question is whether another notice is to be issued after concluding the regular assessment for determining the additional tax payable. Reading the two sections together we have no hesitation in saying that the law has not provided” for another notice for the purpose of section 18A, inasmuch as, it is the continuation of the same proceeding and not a “different proceeding” as viewed by the learned Judges. In this view of the matter, the opinion is that the High Court Division erred in law in taking the view that a separate notice is required for imposing additional tax under section 18 The other contention that section 29 contemplates a notice is also misconceived. That section deals with notice of demand when the tax is due in consequence of any order and such notice shall specify the sum due. But has nothing to do with the calculation of tax under section 18A.
In the result, therefore, .these appeals are allowed and the judgment and order of the High Court Division are set aside. There will be no order as to costs.
Source: 38 DLR (AD) (1986) 66