No penalty when there is no income tax – amendment to statute only prospective – Supreme Court
The Supreme Court in a landmark judgement held that No amendment in a taxing statute can be retrospective, more so in the case of penal provisions, unless legislature means so expressly through the re-construction of the amendment in the statute.
The Supreme Court held that prior to 2002, no penalty could be imposed when the assessee retuned a loss.
The Supreme Court also dwelt on the meanings of
i. "in addition to any tax" and
ii. "total income"
and relied on its own earlier judgement wherein it was held that:-
i. "The word "additional" in the expression "additional income-tax" must refer to a state of affairs in which there has been a tax before."
ii. "The words "charge on the total income" are not appropriate to describe a case in which there is no income or there is a loss."
The Supreme Court agreed that there was a lacuna in the statute but the Court cannot help in such situations as "There is no doubt that if the words of a taxing statute fail, then so must the tax.”
This is a good lesson that all draftsmen, especially of tax laws should learn. Drafting laws should be taken a little above writing note sheets.