1998 (10) TMI 61 - HC - Income Tax

Summary

Issues Involved:
1. Constitutional Validity of Section 158BD of the Income-tax Act, 1961.
2. Jurisdiction of the Assessing Officer.
3. Discrimination under Article 14 of the Constitution.
4. Violation of Fundamental Rights under Articles 19(1)(g) and 21 of the Constitution.

Summary:

1. Constitutional Validity of Section 158BD of the Income-tax Act, 1961:
The petitioners challenged the constitutional validity of Section 158BD of the Income-tax Act, 1961, alleging it violated their fundamental rights under Articles 14, 19(1)(g), and 21 of the Constitution. The court held that Section 158BD was constitutionally valid and did not violate the petitioners' fundamental rights. The provision was designed to address the inefficacies in the earlier system of assessing undisclosed income detected during search and seizure operations. The special procedure for block assessment under Chapter XIV-B was justified and based on an intelligible differentia with a reasonable nexus to the object sought to be achieved by the statute.

2. Jurisdiction of the Assessing Officer:
Initially, the petitioners contended that the notice u/s 158BD issued by the Deputy Commissioner of Income-tax was without jurisdiction. However, this contention was rendered moot after fresh notices were issued by the appropriate Assessing Officer vested with jurisdiction. The court noted that the jurisdictional issue was resolved with the issuance of the new notices, and the petitioners amended their petitions accordingly.

3. Discrimination under Article 14 of the Constitution:
The petitioners argued that Section 158BD created invidious discrimination against them compared to similarly situated persons who could be dealt with under Sections 147 and 148 of the Act. The court rejected this argument, stating that the classification of persons whose undisclosed income is detected in search cases as a separate class was based on an intelligible differentia and had a reasonable nexus with the object of the law. The special procedure for block assessment of undisclosed income was justified and did not violate Article 14.

4. Violation of Fundamental Rights under Articles 19(1)(g) and 21 of the Constitution:
The court held that Section 158BD did not affect the petitioners' fundamental rights to practice any profession, or to carry on any occupation, trade, or business under Article 19(1)(g). The provision was a taxing measure within the legislative competence of Parliament and did not regulate any profession, occupation, trade, or business. Additionally, the court found no merit in the argument that Section 158BD violated Article 21, as it did not deprive any person of life or personal liberty. The provision merely facilitated the assessment of undisclosed income for a block period in search cases, following an appropriate procedure established by law.

Conclusion:
The petitions challenging the constitutional validity of Section 158BD of the Income-tax Act, 1961, were rejected. The court upheld the provision as constitutionally valid, non-discriminatory, and not in violation of the petitioners' fundamental rights under Articles 14, 19(1)(g), and 21 of the Constitution.