H. N. G. FERNANDO, S.P.J.— Xavier v. Wijeyekoon
1966 Present: H. N. G. Fernando, S.P.J., T. S. Fernando, J., andSri Skanda Rajah, J.P. XAVIER, Petitioner, and S. N. B. WIJEYEKOON and 3 others,
S. C. 263165—Application j or Mandates in the nature of a Writ ofProhibitionand Writ of Certiorari under Section 42 of the Courts Ordinance
Income tax—Incorrect return—Power oj Commissioner to impose a penalty onassesses—Constitutional validity of such pouter—Principle of Separation ofPowers—Scope—Income Tax Ordinance (Cap. 242), ss. 80 (1) (2), 90—Writ ofProhibition.
The imposition, by executive officers, of penalties under Revenue Statutesand similar cases, where the penalties have “ the remedial character ofsanctions ”, does not involve tho exercise of judicial power.
Accordingly, when the Commissioner of Inland Revenue (or the Board ofReview), acting under section 80 of the Income Tax Ordinance, imposes amoney penalty against an assessed for making an incorrect return, he does notexercise judicial power such as can only be exercised by a person appointedby the Judicial Service Commission. A Writ of Prohibition does not, therefore,lie to restrain the Commissioner from recovering the penalty.
.A PPLICATION for Writs of Prohibition and Certiorari.
B. Wikramanayake, Q.C., with K. Sivagurunathan and J. V. C.Nathaniel, for the Petitioner.
H. L. de Silva, Crown Counsel, with P. Naguleswaran, Crown Counsel,for the Respondents.
Cur. adv. vult.
July 22, 1966. H. N. G. Fernando, S.P.J.—
Section 80, sub-section (1) of the Income Tax Ordinance (Cap. 242)provides as follows :—
" Where in an assessment made in respect of any person the amountof income assessed exceeds that specified as his income in his return
2»—H 1686 (2/67)
H. N. G. FERNANDO, S.P.J.—Xavier v. Wijeyekoon
and the assessment is final and conclusive under section 79, the Com-missioner may, unless that person proves to the satisfaction of theCommissioner that there is no fraud or wilful neglect involved in thedisclosure of income made by that person in his return, in writing orderthat person to pay as a penalty for making an incorrect return a sumnot exceeding two thousand rupees and a sum equal to twice the taxon the amount of the excess.”
In the present case, the Commissioner acting under that sub-sectionimposed a penalty against the petitioner ; the amount of the penalty wasreduced by the Board of Review on an appeal taken to the Board undersub-section (2). The petitioner thereafter applied to this Court for awrit of prohibition to restrain the Commissioner from recovering thereduced penalty. Learned Crown Counsel does not concede that awrit may properly issue in the circumstances, but it suffices for presentpurposes to consider only the contention of the petitioner that neither theCommissioner nor the Board of Review had jurisdiction to impose apenalty against the petitioner.
This contention is based on the proposition that section 80 (1) confersjudicial power, which can only be exercised by a person appointed bythe Judicial Service Commission. The principal reason urged in favourof this proposition is that section 80 is intended to be an alternative tosection 90. Under the latter section, a person who makes an incorrectreturn under the Ordinance is guilty of an offence punishable with fineand imprisonment upon conviction in a court of law : therefore, it isargued, when the legislature provided in section 80 for the imposition ofa penalty without prosecution, this alternative power to punish a personmaking an incorrect return is itself equivalent to the exercise of judicialpower.
Counsel for the petitioner conceded that Parliament can validlyempower an executive officer to impose a penalty in a case where theincome returned by a person is less than his income as assessed underthe Ordinance. But he contended that section 80 (1) requires a judicial-determination because of the clause “ unless that person proves to thesatisfaction of the Commissioner….”. I am unable to accept this. distinction. An executive power is not converted into a judicial powerby reason of the fact that the power will not be exercised if the subject isable to establish, to the satisfaction of the person empowered, theexistence of some mitigatory circumstance.
In addition, I am in agreement with the submission of learned CrownCounsel that every exercise of power to impose a penalty is not to beregarded as the exercise of judicial power.
H. N. G. FERNANDO, S.P.J.—Xavier v. Wijeyekoon
In Ocean Steam Navigation Go. v. Stranakan1 [1909, U. S. ReportsLawyers Edition p. 1013] the U. S. Supreme Court considered thenature of a Statute which provided that “ if it shall appear to thesatisfaction of the Secretary of the Treasury that any alien broughtto the United States (in a vessel) was afflicted with a loathsome or
dangerous contagious disease, the master or owner (of the vessel)
shall pay to the collector of customs the sum of 100 dollars for each andevery violation of the provisions of this section The Court examinedthe validity of the contention that “ in all cases of penalty or punishment,enforcement must depend upon the exertion of judicial power, eitherby civil or criminal process ”, and the further contention that the Statutehad entrusted judicial power to administrative officials.
In rejecting these contentions, the Court stated that the “ settledjudicial construction, not only as to the tariff, but as to internal revenue,taxation and other subjects, has proceeded on the conception that it
was within the competency of Congressto impose appropriate
obligations and to sanction their enforcement by reasonable moneypenalties, giving to executive officers the power to enforce such penaltieswithout the necessity of invoking the judicial power
In Helvering v. Mitchell2 [U. S. Reports, 82, Lawyers Edition p. 917]the Court discussed the validity of provision in a Revenue Act tothe effect that “ if any part of the deficiency (in an income taxreturn) is due to fraud with intent to avoid tax, then 50 per cent,of the total amount of such deficiency shall be assessed, collectedand paid”. The assessee in that case had previously been charged inthe Courts, under a different provision of the Statute, but upon the samefacts, with the offence of wilfully attempting to evade tax. He hadbeen acquitted of that charge, and the objection taken to the impositionof the penalty was founded on the arguments—(a) that the formeracquittal operated as res judicata on the question of fraud with intent toevade tax, and (6) that the liability to the penalty despite the previousacquittal offended the principle of “ double jeopardy ” embodied in theConstitution.
In rejecting these arguments, the Court cited with approval the dictumI have quoted above from the 1909 decision, and then proceeded :—'“ Theremedial character of sanctions imposing additions to a tax has beenmade clear by this Court in passing upon similar legislation. They areprovided primarily as a safeguard for the protection of the revenue andto re-imburse the Government for the heavy expense of investigationand the loss resulting from the tax-payer’s fraud”. Such a sanctionwas held to be a civil, as opposed to a criminal, sanction. What the
1 1909, U. S. Reports, Lawyers Edition p. 1013.
J U. S. Reports, 32, Lawyers Edition p. 917.
H. N. G-. FERNANDO, S.P.J.—Xavier v. Wijeyekoon
Court meant by the expression “ civil sanction ” is made clear by thefurther statement that “ the determination of the facts upon whichliability is based may be by an administrative agency instead of ajury”. It is implicit in this statement that the imposition of the sanctiondoes not involve the exercise of judicial power in a context in which thesanction is imposed by an administrative authority under Statute.That precisely is the case here.
The Commissioner of Inland Revenue undoubtedly holds a publicoffice, and not a judicial office. The decisions of this Court and of thePrivy Council in cases under the Bribery Act, and the Muslim Marriageand Divorce Act, are in no way here relevant. The problems whicharise in this case and in others call for consideration of the true scopeand effect of the principle of the Separation of Powers. In the consider-ation of these novel problems, this Court cannot derive any assistancefrom the “ traditional ” source, the English Law Reports. But decisionsin other jurisdictions, where the principle has been constitutionallyadopted, particularly in the United States where the Courts havediscussed the meaning and effect of the principle so often and in manydifferent contexts, are of great persuasive authority. And in none ofseveral recent cases in this Court have I heard any argument thatsuch decisions, as have upheld the validity of Statutes, are not in accordwith the principle of the Separation of Judicial Power as recognized byour Constitution.
In the order made in Application No. 414 of 19641 for the quashingof a conviction and sentence by a Court Martial, there is somediscussion, relevant also to the present case, of the recent judgment of thePrivy Council concerning the Separation of Judicial Power under ourConstitution.
I would hold accordingly in the instant case that the imposition of apenalty under section 80 of the Income Tax Ordinance did notconstitute the exercise of judicial power. No other ground was urgedbefore us for the issue of the Writ of Prohibition sought in this case.The application for that AVrit is refused.
T. S. Fernando, J.—I agree.
Sri Skanda Rajah, J.—I agree,v>
1 111964) 69 N. L. R. 193.
A. P. XAVIER, Petitioner, and S. N. B. WIJEYEKOON and 3 others , Respondents