VICTORIA v. THE DEPUTY COMMISSIONER OF INLAND REVENUE

062-SLLR-SLLR-2003-V-2-VICTORIA-v.-THE-DEPUTY-COMMISSIONER-OF-INLAND-REVENUE.pdf


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VICTORIA
v
THE DEPUTY COMMISSIONER OF INLAND REVENUE
COURT OF APPEALDISSANAYAKE, J.ANDSOMAWANSA, J.
CA 1235/871236/87
M.C. KANDY 63672M.C. KANDY 63676MAY 31, ANDJULY 31, 2002 ANDSEPTEMBER 26 ANDOCTOBER 11,2002
Inland Revenue Act, No. 28 of 1979, sections 125( 1), and 130( 1) – Certificate forthe recovery of tax – Who is a defaulter? – Notice of assessment did not specifya date to pay fine – No default sentence – Validity.
The respondent sought the recovery of two sums of money, being income tax andwealth tax allegedly defaulted by the petitioner. On being summoned to showcause, the petitioner contended that, he is not a defaulter in terms of section125(1) in that, the notice of assessment did not specify any date on or beforewhich the petitioner was requested to pay. The learned Magistrate rejected thiscontention. The petitioner moved in revision, and further contended that, thelearned Magistrate in imposing the fines failed to specify a default sentence, mak-ing the order void.
CAVictoria v The Deputy Commissioner of Inland Revenue 405
(Somawansa, J.).'
Held:
In terms of section 125(1) a tax payer is deemed to be a defaulter ifhe fails to pay such quarterly instalment on or before the date given insection 97(1) and he will be deemed to be a defaulter if he fails to wipeoff his full liability by 30th November immediately succeeding the endof the year of assessment.
If the tax payer fails to pay any tax or wipe off his liability by the 30thNovember or has not sent a return section 115 applies.
When the assessor demands the payment by notice he would bedemanding taxes that are already in default and the due dates arelong past. The legislature in its wisdom has enacted in section 115(1)that the assessor shall demand the tax forthwith.
However, in terms of the proviso to section 115(1) there is a situationwhich requires the assessor to specify a date i.e. if he is of the opin-ion that the tax payer is about to leave the country or that it is expedi-ent to do so and require him to pay the taxes earlier than the dategiven in section 97(1). Thus when he advances the date of payment itis quite logical that he should specify a date for payment. In the instantcase, notices of assessments are all normal assessments section125(1) read with section 97(1) and not a situation that arises undersection 115(1).
Imposition of a fine need not be accompanied by a default sentence,if it is to be a valid order.
Section 130(1) of the Act casts no duty on the Magistrate to say in somany words that the petitioner has not shown sufficient cause asrequired by section 130(1). It is apparent from his order that havingconsidered the submissions/authorities cited/material placed beforehim, he was not satisfied with the cause shown by the petitioner.
APPLICATION in revision from the order of the Magistrate’s Court of Kandy.
Cases referred to:
De Jong v Commissioner of Income Tax – 57 NLR 279
Charlotte Beatrice Perera v Commissioner of Inland Revenue – 70 CLW46
Mohamed Raphic Mohamed Hamza v Commissioner of Inland Revenue- SC Appeal No. 3/89- MC Kalutara 44289 – 44300 SCM 1.12.1991
Puswella Perera v Commissioner of Inland Revenue – (1966) 70 CLW 46
Vairayan Nadar v Commissioner of Inland Revenue – 72 NLR 164
Smale v Commissioner of Inland Revenue – (1971) 74 NLR 355
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Rajan Phillips v Commissioner of Inland Revenue – Srikantha's LawReports Vol. 2 – Part 10.
°8. M.E. de Silva v Commissioner of Inland Revenue – 53 NLR 2809. Nifaweera v Commissioner of Inland Revenue -63 NLR 485Stanley Fernando for petitioner.
A.H.M.D. Nawaz, State Counsel, for respondents.
Cur.adv.vult
September, 18, 2003.
SOMAWANSA, J.
These are two revision applications preferred from the orders of 01the learned Magistrate of Kandy dated 22.09.1987 made in respect oftwo cases. As against the order in case No.63672 revision applicationNo. 1235/87 has been preferred and as against the order in case No.63676 revision application No. 1236/87 has been preferred. In bothrevision applications the petitioner is V.P.B. Victoria and as the facts inthe two applications are identical parties have agreed that both appli-cations could be taken together.
The relevant facts are two certificates marked P1 were filed by therespondent in the Magistrate Court of Kandy under section 130(1) of 10the Inland Revenue Act, No.28 of 1979 for the recovery of two sumsof money Rs.700,544/- and Rs. 1,075,333/- being income tax andwealth tax allegedly defaulted by the petitioner. On being summonedby the learned Magistrate to show cause why further proceedingsshould not be taken against the petitioner for the recovery of the saidamounts, the only cause shown by the petitioner was' that he was nota defaulter within the meaning of section 125(1) of the InlandRevenue Act, No.28 of 1979 in that the notice of assessments thatwere served on the petitioner marked P2A, P2B and P2C did notspecify any date on or before which the assessee was required to pay 20the taxes. At the conclusion of the inquiry the learned Magistrate byhis order dated 22.09.87 came to a finding that the petitioner was adefaulter and proceeded to impose the said amounts of tax as a finesin terms of section 130(1) of the Inland Revenue Act.
At the hearing of the revision applications one of the matters raisedby the counsel for the petitioner was that the learned Magistrate erred
CA . Victoria v The Deputy Commissioner of Inland Revenue407
(Somawansa, J.)
in law and rendered the proceedings instituted under section 130(1)of the Inland Revenue Act abortive, in that the learned Magistrate inimposing fines failed to specify a default sentence. In support of thiscontention counsel cited the decision of the Supreme Court in thecase of De Jong v Commissioner of income TaxP) In that case thefacts were:
‘The appellant, an assessee who defaulted his payment of incometax, was summoned under section 80(1) before the Magistrate. Onhis admitting that this amount was due the Magistrate made anorder as follows: “I fine the accused Rs.9,993. Time till 1.2 for fine”.This time was extended from time to time as a result of paymentsby instalments. In the meantime the appellant was adjudicated aninsolvent. The Commissioner filed in those proceedings a noticeunder section 81 claiming payment from the receiver. The claim ofthe Commissioner was not satisfied, even in part, as there were noassets in the hands of the receiver. The appellant was granted acertificate of conformity of the third class. He, thereupon made anapplication to the Magistrate for an order of discharge of the appel-lant from the proceedings in case No.38,322. The Magistraterejected the application and ordered him to pay the balance of Rs.4,645 and gave him time to pay. The appellant appealed from thatorder.
Held:
that the power vested in a Magistrate under section 312(1) (b)of Criminal Procedure Code of directing that an offender shallsuffer a term of imprisonment in default of payment of a fine towhich he is sentenced can be exercised only at the time of theimposition of the sentence and not thereafter.
that where the Magistrate in proceedings under section 80(1) ofthe Income Tax Ordinance merely makes an order that thedefaulter should pay the tax, without giving any direction that indefault of payment he should suffer a term of imprisonment, itis not open to the Magistrate to give that direction subse-quently.
that no further proceedings can now be taken under section80(1) of the Income Tax Ordinance.
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that in view of the above, it is unnecessary to consider the argu-ment as to whether the order of the Magistrate should be setaside”.
If one were to examine the said judgment it is apparent thatWeerasooriya, J. in his judgment does not say that imposition of a finemust be accompanied by a default sentence if it is to be a valid order.
What was held in that case was that the power vested in a Magistrateunder section 312(1) (b) of Criminal Procedure Code of directing that 70an offender shall suffer a term of imprisonment in default of paymentof a fine to which he is sentenced can be exercised only at the time ofthe imposition of the sentence and not thereafter, and that theMagistrate when proceeding under section 80(1) of the Income TaxOrdinance merely makes an order that the defaulter should pay thetax, without giving any direction that in default of payment he shouldsuffer a term of imprisonment, it is not open to the Magistrate to givethat direction subsequently.
In the case of Charlotte Beatrice Perera v Commissioner of InlandRevenue*® T.S. Fernando, J. opted not to follow De Jong v boCommissioner of Inland Revenue (supra) and in interpreting the cor-responding Section 85(1) of the Inland Revenue Tax Ordinance held-
“That it is not obligatory on a Magistrate in every case where taxin default is deemed by section 85(1) of the Income TaxOrdinance to be a fine, to order a term of imprisonment indefault of payment of fine.
That although no appeal lies against an order made in pur-suance of section 85(1) of the Ordinance, it is open to theSupreme Court to alter such order in the exercise of its power
of revision”.90
Per T.S. Fernando, J.
(a.) “No question of convicting a person arises where proceedingsunder section 85 of the Ordinance have been taken. Where suf-ficient cause has not been shown, the tax in default shall bedeemed to be a fine imposed by a sentence of the Magistrateon the defaulter for an offence punishable with fine only or notpunishable with imprisonment”.
CA Victoria v The Deputy Commissioner of Inland Revenue409
'(Somawansa, J.),
(b.) “This Court does not ordinarily interfere with the exercise of a judi-cial discretion. But the learned Magistrate, in making the ordersought to be revised here acted on the assumption that he wasobliged, at the time of imposition of the fine, also to make anorder in respect of imprisonment in default of payment. DeJong’s case<1) had been cited before him, and Weerasooriya, J.had there made the observation that the object of the proceed-ings under section 85(1) would be defeated if the Magistratemerely makes an order that the defaulter should pay the tax asa fine. The learned Magistrate, therefore acted in the instantcase as if he had no discretion in regard to the questionwhether imprisonment in default of payment should be orderedor not”.
It is also pertinent at this point to refer to section 130(1) of theInland Revenue Act, No. 28 of 1979 which provide for proceedings forrecovery before a Magistrate. The Section reads as follows:
130(1) “Where the Commissioner-General is of opinion in anycase that recovery of tax in default by seizure and sale is impractica-ble or inexpedient, or where the full amount of the tax has not beenrecovered by seizure and sale, he may issue a certificate containingparticulars of such tax and the name and last known place of businessor residence of the defaulter to a Magistrate having jurisdiction in thedivision in which such place is situate. The Magistrate shall thereuponsummon such defaulter before him to show cause why further pro-ceedings for the recovery of the tax should not be taken against him,and in default of sufficient cause being shown, the tax in default shallbe deemed to be a fine imposed by a sentence of the Magistrate onsuch defaulter for an offence punishable with fine only or not punish-able with imprisonment, and the provisions of sub-section (1) of sec-tion 291 (except paragraphs (a), (d), and (i) thereof) of the Code ofCriminal Procedure Act, No.15 of 1979, relating to default of paymentof a fine imposed for such an offence shall thereupon apply and theMagistrate may make any direction which, by the provisions of thatsubsection, he could have made at the time of imposing such sen-tence”.
In the case of Mohamed Raphic Mohamed Hamza vCommissioner of Inland Revenue (3) Fernando, J.observed at page 6
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of his judgment:
“It is strictly unnecessary to consider this question, but in view ofsection 59 proviso (iii), and the decisions in. Puswella Perera vCommissioner of Inland Revenue<4), Vairayan v Commissioner ofInland Revenue^) and Smale v Commissioner of InlandRevenue<6). I am of the view that no default sentence should have 140been imposed, particulary as sentence should have beenimposed, particulary as there was some evidence suggesting thatassets of the deceased had been disposed of by the heirs after hisdeath but prior to the appellant being appointed administrator”.
In view of the above reasoning I am unable to agree with the coun-sel for the petitioner that the learned Magistrate has erred in law.
It is also submitted by the counsel for the petitioner that the learnedMagistrate erred in law in holding in his order that the only matter thata Magistrate can consider in a case shown by the alleged defaulter inproceedings under section 130(1) of the Inland Revenue Act is 150whether the defaulter has paid the tax or whether the person who isliable to pay the tax has been brought before court. In Support of thecontention the counsel has cited the said unreported judgment ofMark Fernando, J., in Mohamed Raphic Mohamed Hamza vCommissioner of Inland Revenue Regional Office Kalutara (supra).
He also submits that the learned Magistrate has erred in law in mis-construing the ratio decidendi of the judgment of G.P.S. de Silva, J. ashe then was in Rajan Phillip v Commissioner of Inland Revenue<7). Iam unable to agree with this submission of the counsel for the peti-tioner, for nowhere does the learned Magistrate say that the only mat- 160ters that he can consider are whether the defaulter has paid the tax orwhether the person who is liable to pay the tax has been broughtbefore Court. Rajan Phillip v Commissioner of Inland Revenue (supra)was cited before the learned Magistrate by the counsel for the peti-tioner. In that case the facts were Rajan Phillip the principal officer ofGemmex Ltd., was taken to Court for recovery when the assessmentwas in the name of the company. An objection was taken that RajanPhillip could not be vicariously held liable for the tax due fromGemmex Ltd. The learned Magistrate over-ruled the objection andheld Rajan Phillip as principal officer of Gemmex Ltd. was liable and 170imposed the sum due as a fine and a default term of simple impris-onment. In the revision application filed by Rajan Phillip on page 135
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G.P.S. de Silva, J. as he then was did say "on a plain reading of sec-tion 111(1) and section 106 I agree with Mr. Ambalavanar’s submis-sion that proceedings in terms of section 111 are available onlyagainst the defaulter, that is to say a person who has been assessedto tax and has defaulted in the payment of such tax as required underthe provisions of this Act”. In that case he proceeded to hold that sincethe company had been assessed the defaulter was the company andrecovery proceedings were not available against the principal officer, isoHis Lordship also reiterated the ratio of Gratien, J. in M.E. de Silva vCommissioner of Inland Revenue(8) the facts were:
“Where income tax due from a limited liability company was indefault and the Commissioner of Income Tax, purporting to initiateproceedings under section 80 of the Income Tax Ordinance,sought to recover the tax from the Managing Director of theCompany and not from the company itself-”
Held :
“(i) that the certificate issued by the Commissioner of Income Taxdid not preclude the Managing Director from taking objection 190that he was not the defaulter” within the meaning of section 80of the Income Tax Ordinance. A defaulter, for the purposes ofsection 80, is a person who, having been duly assessed undersection 64 as being “chargeable with tax”, has omitted, in con-travention of section 76, to pay such tax on or before the datespecified in the notice of assessment served on him as the per-son so chargeable”.
(ii) that the provisions of section 62 of the Income Tax Ordinancedo not make the principal officer of a company chargeable outof his personal assets with income tax levied on the company’s 200assessable income”.
In the circumstances, it is apparent that Rajan Phillip’s case(supra) has no application to the instant case as in that case RajanPhillip who had not been assessed was taken to Court whereas in theinstant case the petitioner who had been assessed was broughtbefore the learned Magistrate. In fact the learned Magistrate in hisorder did refer to Rajan Phillip’s case and stated that on a perusal ofthat decision it transpired that a Magistrate should consider whetherthe defaulter has paid the tax or not or whether the person who has
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been assessed is brought before Court. However he did not say that 210these were the only two matters that he could go into.
In the case:' of Mohamed Raphic Mohamed Hamza vCommissioner of Inland Revenue (supra) Fernando, J. cited numer-ous precedents to show that an alleged defaulter is entitled on a vari-ety of grounds to show that the Magistrate’s Court has no jurisdiction.
In that case action was filed against the administrator (son of Hamza)of the estate of the deceased. But the assessment was made in thename of the deceased during his lifetime. Fernando, J. held that theson was not liable because he was not a defaulter. In any event thiscase was decided under the Inland Revenue Act, No. 04 of 1963. The 220instant case falls within the ambit of Inland Revenue Act, No. 28 of1979. However in the instant case the challenge in the Magistrate’sCourt had been to the notice of assessment and not to the assess-ment made. In fact the learned Magistrate did come to a definite find-ing that the petitioner was indeed a defaulter.
Another matter raised by the counsel for the petitioner is that thelearned Magistrate has misdirected himself in law in holding that thecertificate filed by the respondent marked P1 is conclusive evidencethat the taxes specified in the said certificate is in default and that it isnot necessary for him to consider the causes shown by the petitioner 230that he is not a defaulter and thus failed to consider the provisions ofsection 130(7) of the Inland Revenue Act, Section 130(7) reads as fol-lows:
f
“In any proceeding under subsection (1), the Commissioner-General’s certificate shall be sufficient evidence that the tax hasbeen duly assessed and is in default, and any plea that the tax isexcessive, incorrect, or under appeal shall not be entertained.”
The counsel has also cited the decision in Nilaweera vCommissioner of Inland Revenue.(9> However on an examination ofthe order of the learned Magistrate, I am unable to agree with this sub- 240mission for nowhere in his order does the learned Magistrate say thatthe certificate filed by the respondent is conclusive evidence nor doeshe say that it is not necessary for him to consider the causes shownby the petitioner. The learned Magistrate refers to section 130(2)which reads as follows:
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130.(2) ‘The correctness of any statement in a certificate issued bythe Commissioner-General for the purposes of sub section (1)shall not be called in question or examined by the Magistrate inany proceeding under this section and accordingly, nothing in thatsubsection shall be read and construed as authorizing aMagistrate to consider or decide, the correctness of any statementin such certificate or to postpone or defer such proceeding for aperiod exceeding thirty days by reason only of the fact that anappeal is pending against the assessment in respect of which thetax in default is charged”.
It is to be seen that in his order the learned Magistrate refers tosection 130(2) and to the provisions contained therein. It is concededthat in the case cited by counsel for the petitioner Nilaweera vCommissioner of Inland Revenue (supra) Gunasekera, J. observed at487.
“Subsection (2) of the section provides that in any proceedingunder subsection (1) the Commissioner’s certificate shall be sufficientevidence that the tax has been duly assessed and is in default. It mustbe noted that the certificate is to be merely sufficient, and not conclu-sive, evidence of these facts. Moreover, the provision that it shall beevidence connotes that an issue as to whether the tax has been dulyassessed can arise for decision in such a proceeding. With respect Iagree with the view taken in de Silva's (suprap) that the provisions ofthese subsections do not have the effect of preventing an allegeddefaulter from satisfying the Magistrate that he was not dulyassessed”.
However the said observations of Gunasekera, J. have no rele-vance to the instant case in view of the fact that as stated above theonly challenge in the Magistrate’s Court had been to the notice ofassessment and that too to the absence of the date of payment. Therewas no dispute as regards the certificate filed by the respondent andthe learned Magistrate on the material placed before him has come toa finding that the petitioner is a defaulter.
Counsel for the petitioner also submits that in refusing to considerthe submission of facts and law urged by the petitioner in the pro-ceedings before the learned Magistrate that he was not a defaulterwithin the meaning of section 125(1) of the Inland Revenue Act, theMagistrate acted ultra vires the Inland Revenue Act and imposed a
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fine without making any determination that the petitioner had notshown sufficient cause as required by the provisions of section 130(1)of the Inland Revenue Act. However it should be noted that section130(1) of the said Act cast no duty on the Magistrate to say in so manywords that the petitioner has not shown sufficient cause as requiredby section 130(1) of the said Act. It is quite apparent from his orderthat having considered the submissions made by the parties, the 290authorities cited and the material placed before him, he was not sat-isfied with the cause shown by the petitioner. That would be the onlylogical conclusion that one could arrive at.
These revision applications raise a fundamental question of law inthat should notice of assessment issued in terms of section 115(1) ofthe Inland Revenue Act, No.28 of 1979 require the assesee to pay taxon or before a particular date. The main thrust of the counsel for thepetitioner is that the notice of assessment should have a specifieddate on or before which the assessee is required to pay tax and in theabsence of such a specific date the assessee does not become a 300defaulter. In the instant case, it is admitted that the notice that wasserved on the petitioner marked P2A, P2B and P2C did not specify adate on or before which the petitioner was required to pay theamounts. Rather what the said notices marked P2A, P2B and P2Cspecified was that further penalties will be added if the tax and penal-ty charges are not paid forthwith.
Payment of tax by self assessment that is prevailing today is to befound in Chapter XIV section 97 of the Inland Revenue Act, No. 28 of1979 which reads as follows:
97(1) “Any income tax, wealth tax or gift tax which any person is 310liable to pay under this Act for any year of assessment shall bepaid by such person to the Commissioner-General in four instal-ments on or before the fifteenth day respectively of August,November and February in that year of assessment and the fif-teenth day of May of the next succeeding year of assessmentnotwithstanding that no assessment has been made on him by anassessor. Each such instalment is hereinafter referred to as a“quarterly instalment”.
According to section 163, year of assessment is interpreted tomean as ‘the period of 12 months commencing on the 1st day of April 320
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of any year and ending on the 31 st day of March in the immediatelysucceeding year’. It appears that in terms of section 97(1) of the.Inland Revenue Act, No.28 of 1979 there is an obligation on the partof the tax payer to pay these quarterly instalments on or before the rel-evant date. Words in the said section 97(1) makes it clear that thereneed not be any assessment that should be served on the tax payerwhen section 97(1) imposes the burden on payment of tax throughself computation. The question arises then as to how the tax payershould compute the quantum. It is to be seen that section 97(2) of thesaid Act solves this problem.'330
Section 97(2) of the. said Act reads as follows:
97 (2) ‘The quarterly instalment of a tax payable by any person forany year of assessment shall be one quarter of the tax payable byhim for that year of assessment”.
Section 125(1) of the Inland Revenue Act, No.28 of 1979 defines howtaxes are deemed to be in default. The said section 125(1) readsas follows:
125(1) ‘Where a quarterly instalment of a tax or a part of suchinstalment for any year of assessment is not paid on or before thedate specified in section 97(1) for the payment of that instalment, 340such instalment of tax or part thereof, or where any tax or partthereof assessed by an assessor for any year of assessment andrequired to be paid on or before the date specified in the notice ofassessment (such date, in the case of any tax which is required tobe paid under section 97(1), being a date earlier than the datebefore which such tax or part there is required to be paid under thatsection) is not so paid, such tax or part thereof shall be deemed tobe in default-”.
On a close scrutiny of section 125(1) would show that the sectionhas two limbs. It could be seen that the 1st limb refers to a tax in 350default with reference to the dates given in section 97(1) while tax indefault with reference to a date given in a notice of assessment isreferred to in the 2nd limb.
Accordingly in terms of section 125(1) read with section 97(1) thereis a duty cast on the tax payer to pay quarterly instalments of any yearof assessment which would fall on the 15th day of August, November,
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February and May. However in terms of section 125(2) proviso (ii) hemust wipe off his full liability by making the full payment by 30th dayof November immediately succeeding the end of the year of assess-ment in respect of which such quarterly instalment of tax become due, 360the proviso (ii) to section 125(2) reads as follows:
(ii) “where any person has paid as quarterly instalment of tax forany year of assessment a sum which is not less than one quarterof the income tax and wealth tax payable by such person for theyear immediately preceding that year of assessment, such personshall not be liable to pay penalty in respect of such quarterly instal-ment of tax under the preceding provisions of this section until thethirtieth day of November immediately succeeding the end of theyear of assessment in respect of which such quarterly instalmentsof tax became due.”370
Accordingly,'it is to be seen that in terms of section 125(1) of thesaid Act the tax payer is deemed to be a defaulter if he fails to payeach quarterly instalment on or before the date given in section 97(1)of the said Act and also he will be deemed to be a defaulter if he failsto wipe off his full liability by 30th November immediately succeedingthe end of the year of assessment.
Let us now consider the situation where the tax payer has failed topay any tax or wipe off his liability by 30th November or has not senta return. In such a situation section 115 of the Inland Revenue Actcomes into play. The said section reads as follows:380
115(1) “Where any person, who in the opinion of an assessor isliable to any income tax, wealth tax or gift tax for any year ofassessment has not paid such tax or has paid an amount less thanthe proper amount which he ought to have paid as such tax forsuch year of assessment the assessor may, subject to the provi-sions of subsection (3) and (5) and after the fifteenth day ofNovember immediately succeeding that year of assessment,assess the amount which in the judgment of the Assessor ought tohave been paid by such person, and shall by notice in writingrequire such person to pay forthwith –
(a) the amount of tax so assessed, if such person has not paid anytax for that year of assessment, or
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(b) the difference between the amount of tax so assessed and theamount of tax paid by such person for that year of assessment, ifsuch person has paid any amount as tax for that year of assess-ment”.
When the assessor sets about assessing the tax payer in terms ofsection 115 of the Inland Revenue Act, No. 28 of 1979 and demandthe payment by notice he would be demanding taxes that are alreadyin default and the due dates for payment are long past. Hence the leg- 400islature in its wisdom has enacted in section 115(1) that the assessorshall demand the tax forthwith. However in terms of the said section115(1) there is also a situation which requires the assessor to specifya date. The situation is provided for in the proviso to section 115(1)which reads as follows:
“Provided that an assessor may, subject to the provisions of sub-section (3) and (5), assess any person for any year of assessmentat any time prior to the fifteenth day of November immediately suc-ceeding that year of assessment if he is of the opinion that suchperson is about to leave Sri Lanka or that it is expedient such per- 410son to pay such tax to the Commissioner-General earlier than asrequired under section 97(1)”.
In the case of proviso situation the assessor can assess even priorto 15th November if he is of the opinion that the tax payer is about toleave Sri Lanka or that it is expedient to do so for the protection of therevenue and require him to pay the taxes earlier, than the dates givenin section 97(1) of the Act. Thus when he advances the date of pay-ment it is quite logical that he should specify a date for payment.Accordingly, if the tax payer does not pay on or before the date spec-ified in the notice then what is not paid on or before that date would 420be regarded as a default in terms of the 2nd limb of section 125(1) ofthe said Act. The 2nd limb of section 125(1) reads as follows:
125(1) “or where any tax or part thereof assessed by an Assessorfor any year of assessment and required to be paid on or beforethe date specified in the notice of assessment (such date, in thecase of any tax which is required to be paid under section 97(1),being a date earlier than the date before which such tax or partthereof is required to be paid under that section) is not so paid,such tax or part thereof shall be deemed to be in default.”
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The notice of assessment referred to in the 2nd limb of section 430125(1) is the notice of assessment contemplated in the proviso to sec-tion 115(1) and if proviso to section 115(1) gives rise to an assess-ment the notice must specify a date and the payment of the amountspecified in such notice has to be paid on or before the date specifiedin the notice.
Applying these principles to the instant action and on a perusal ofthe notice of assessment marked P2A, P2B and P2C it is to be seenthat the said notices are all normal assess'ments made after 15thNovember immediately succeeding the end of the year of assessmentin respect of which such quarterly installments of tax become due. 440
A
Notice marked Year of assessmentThe date after which the
Assessor could assess
P2A1982/8315 November 1983
P2B1983/8415 November 1984
P2C1991/9215 November 1982
Date of NoticeLast date before which
assessment mustbe made
31.03.86
31.03.87
26.11.198431.03.85
It is to be noted that when the notices were issued asking the peti-tioner to pay forthwith the due date for respective year of assessmentwere long past and the notices of assessment were all within 3 yearperiod for in terms of section 115(5) of the said Act an assessmentgets time barred in 3 years.
The Counsel for the petitioner was also heard to say that theassessments in dispute were made under section115(2) of the InlandRevenue Act, No. 28 of 1979. The said section 115(2) reads as fol-lows:460
“Where it appears to an assessor that any person liableto- income tax, wealth tax or gift tax for any year ofassessment has been assessed at less than the proper
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amount, the Assessor may subject to the provisions ofsub-section (3) and sub-section (5), assess such personat the additional amount at which according to his opin-ion such person ought to have been assessed and theprovisions of this Act as to notice of assessment, appealand other proceedings shall apply to such additional
assessment and to the tax charged thereunder.”
Section 115(2) refers to an additional assessment. In terms of thissection if the tax payer has been under assessed for whatever reasonthe assessor may undertake a second assessment and the provisionsof the Act as to notice of assessment, appeal and other proceedingsshall apply. It appears that even in terms of section 115(2) of theInland Revenue Act the tax assessed is on the total income on whichhe should have paid the tax on his own and are taxes already indefault for the respective year of assessment. Hence the proviso sit-uation in terms of the 2nd limb of section 125(1) will have no applica-tion to section 115(1) of the said Act.
There is one other matter that needs our attention, that being theagreement said to have been entered into between the petitioner andthe respondent on 30,10.85. The said agreement is purported to becontained in the notes of interview marked R1. It is submitted by thecounsel for the petitioner that the document marked R1 does not con-stitute an agreement in terms of which the partners of the partnershipagreed to be assessed on the taxes specified in the respective certifi-cate marked P1. This agreement was never a part of the proceedingsbefore the learned Magistrate. However reference has been made inthe respondent’s affidavit to the said agreement and the said agree-ment said to contain in the assessor’s notes of interview has beenmarked R1. In any event, in view of the Inland Revenue (SpecialProvisions) Act, No. 10 of 2003 it becomes necessary to consider thevalidity of this agreement.
The position taken by the petitioner is that there is nothing in thenotes of interview marked R1 indicating that the precedent partnerhas agreed to the assessment of additional income as proposed bythe assessor. That though two of the partners have signed the notesof interview they have not agreed to pay the taxes arising from theproposed additional income nor has the quantum of the total taxespayable been specified in the notes of interview marked R1. There is
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also no mention about the additional net wealth or wealth tax which isspecified in the certificate of taxes in default marked P1. Also it is sub-mitted that the post-script remark to the agreement made by assessorto the effect. “I find the precedent partner to make untruthful state-ments, very incorporative and difficult and also the fact that the prece-dent partner had stated that he was unable to meet the tax liabilitiesarising from the additional income proposed to the assessed would goto show that there was no consensus ad idem. As for the post-scriptremark it has been made it appears after the agreement was signed 510by the two partners of the partnership and has no bearing on theagreement. It appears to me with all the short comings there is thepetitioner who has come to an agreement with the respondent andthis becomes manifest with the placing of the signatures of the twopartners on the pages containing the notes of the interview.
Furthermore, it is evident from the two letters marked P8 and P10addressed to the respondent by the petitioner wherein reference ismade to the agreement entered by the parties. Letter marked P8 isdated 30.10.1986 while letter marked P10 is dated 14.02.1986 andthe agreement as found in the interview notes marked R1 is dated 52030.10.85. Therefore it could be seen that having entered into anagreement as is shown in document marked R1 which fact is admit-ted by the petitioner by the letters marked P8 and P10 he seeks torepudiate the said agreement in the said two letters on the basis thathe placed his signature to the said agreement under duress. It is per-tinent to note that the petitioner takes up this position nearly 4 monthsafter he signed the agreement as shown in R1. It is strange for a part-ner of a business to sleep over his rights for 4 months. It appears thathaving agreed to the proposals discussed before the assessor at theinterview he now seeks to go back on the agreement reached as per 530document marked R1.
For the above reasons, I would dismiss the two revision applica-tions marked CA1235/87 and CA1236/87 with costs fixed at Rs.5000/-. The Registrar is directed to return the case record to theappropriate Magistrate’s Court forthwith.
DISSANAYAKE, J. – I agreeApplication dismissed.