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Issues involved: Validity of section 201 of the Income-tax Act, 1961, under articles 14 and 19 of the Constitution of India.
Summary: The petitioner challenged the validity of section 201 of the Income-tax Act, 1961, for failing to provide a process of assessment or determination of liability, alleging violation of constitutional articles. Section 201 imposes penalties for failure to deduct or pay tax, deeming the defaulter as an assessee in default. The proviso requires the Assessing Officer to ascertain if the failure was without good reason before levying penalties. The section mandates tax deduction at source, with penal consequences for non-compliance. The court found that section 201 is a penal provision to treat defaulters as assessees in default for failure to deduct or pay tax. The proviso ensures an opportunity for the defaulter to present reasons before penal action. The Assessing Officer is responsible for determining the liability, computing the unpaid tax, and issuing a demand notice. The section includes safeguards and appeal mechanisms, making it constitutionally valid. The court dismissed the argument that direct payment under section 191 is relevant, stating that the failure to deduct tax must be based on assessment or available records. The Assessing Officer must provide an opportunity for the defaulter, ensuring procedural fairness. The petitioner was advised to file an appeal within four weeks to address any concerns about limitation. The writ petitions were disposed of with these observations.
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