1963 (11) TMI 77 - HC - Income Tax

Summary

Issues Involved:
1. Constitutionality of Section 3 of the Indian Income-tax Act under Article 14 of the Constitution.
2. Validity of the assessments made on the petitioner as the principal officer of an association of persons for the assessment years 1952-53 to 1956-57.
3. Applicability of the doctrine of res judicata to the writ petitions.

Detailed Analysis:

1. Constitutionality of Section 3 of the Indian Income-tax Act under Article 14 of the Constitution:
The petitioner challenged Section 3 of the Indian Income-tax Act, asserting it violated Article 14 of the Constitution by allowing the taxation of an "association of persons" or its members individually, thereby vesting the taxing authorities with unguided and arbitrary powers. The petitioner argued that this could lead to discriminatory treatment among associations similarly situated. The court, however, dismissed this contention, stating that the Act does not vest uncontrolled power in the authorities. The discretion to tax an association or its members individually is guided by the underlying policy and purpose of the Act. The court emphasized that the Act's scheme ensures that the authorities do not exercise their discretion in a naked arbitrary fashion, thereby upholding the constitutionality of Section 3.

2. Validity of the assessments made on the petitioner as the principal officer of an association of persons for the assessment years 1952-53 to 1956-57:
The petitioner was assessed as the principal officer of an association of persons for the assessment years 1952-53 to 1956-57. The petitioner contended that there was no evidence to establish the existence of such an association and that the assessments were improperly made. The court referred to a prior decision (T.C. No. 201 of 1960) where it was held that the assessment for the year 1951-52 was not lawfully made, but the assessments for the subsequent years were valid. The court reiterated that the constitutional validity of the charging section was not decided in the earlier proceedings, and thus, the petitioner could raise this issue in the present writ petitions.

3. Applicability of the doctrine of res judicata to the writ petitions:
The respondent raised a preliminary objection regarding the maintainability of the writ petitions, arguing that the validity of the assessments for the years 1952-53 to 1956-57 had already been upheld in T.C. No. 201 of 1960, and thus, the petitioner could not re-agitate the same issue. The court acknowledged that a decision between the parties, which stands unchallenged, binds them, and the principle of res judicata applies to writ petitions. However, the court noted that the constitutional validity of the charging section was not decided in the earlier proceedings, and the petitioner was entitled to challenge it in the present writ petitions. The court also emphasized that the rule of constructive res judicata should not generally be applied to writ petitions filed under Article 32 or Article 226, particularly in cases involving fundamental rights.

Conclusion:
The court dismissed the writ petitions, upholding the constitutionality of Section 3 of the Indian Income-tax Act and the validity of the assessments made on the petitioner as the principal officer of an association of persons for the assessment years 1952-53 to 1956-57. The court also held that the writ petitions were maintainable, as the constitutional validity of the charging section was not decided in the earlier proceedings, and the principle of constructive res judicata did not apply in this case. The petitioner was ordered to pay the costs of the department in W.P. No. 1374 of 1961.