1984 (12) TMI 38 - HC - Income Tax

Summary

Issues involved:
1. Constitutional validity of section 271(1)(c) of the Income-tax Act, 1961.
2. Constitutional validity of section 18(1)(a) of the Wealth-tax Act, 1957.
3. Alleged discrimination and violation of Article 14 of the Constitution.
4. Alleged unreasonable restriction on fundamental rights under Article 19(1)(f) of the Constitution.

Issue-wise detailed analysis:

1. Constitutional validity of section 271(1)(c) of the Income-tax Act, 1961:
The petitioners challenged the constitutional validity of section 271(1)(c) of the Income-tax Act, 1961, which deals with penalties for concealing income or furnishing inaccurate particulars of income. The court examined the legislative history and amendments to this section, noting that it was intended to act as a deterrent against tax evasion. The court found that the provision is preventive in nature, although penal in character, and is directed only against deliberate tax dodgers. The court upheld the validity of this section, stating that it does not involve any hostile discrimination and is not arbitrary or unjust.

2. Constitutional validity of section 18(1)(a) of the Wealth-tax Act, 1957:
The petitioners also challenged the constitutional validity of section 18(1)(a) of the Wealth-tax Act, 1957, which imposes penalties for failing to furnish returns within the prescribed time. The court noted that the provision is aimed at preventing tax evasion and ensuring timely compliance with tax laws. The court found that the penalties prescribed under this section are meant to be an effective deterrent against non-compliance and are not arbitrary or discriminatory. The court upheld the validity of this section, stating that it is a reasonable restriction in the interest of the general public.

3. Alleged discrimination and violation of Article 14 of the Constitution:
The petitioners argued that the impugned provisions are discriminatory and violate Article 14 of the Constitution, which guarantees equality before the law and equal protection of the laws. The court referred to the principle that "like should be treated alike" and noted that the provisions classify tax evaders into different categories, treating those similarly situated in a similar manner. The court observed that the legislation is based on reasonable classification and does not amount to class legislation. The court cited several Supreme Court decisions to support its view that economic legislation should be given greater latitude and judicial deference. The court concluded that the impugned provisions do not violate Article 14 of the Constitution.

4. Alleged unreasonable restriction on fundamental rights under Article 19(1)(f) of the Constitution:
The petitioners contended that the impugned provisions impose an unreasonable restriction on their fundamental rights guaranteed under Article 19(1)(f) of the Constitution, which deals with the right to acquire, hold, and dispose of property. The court referred to previous judgments of the Gujarat and Madras High Courts, which upheld the validity of similar provisions. The court noted that the penalties are intended to prevent tax evasion, which is a loss to the exchequer and the public. The court concluded that the provisions are in the interest of the general public and are a reasonable restriction on the fundamental rights of the petitioners. The court held that the impugned provisions do not violate Article 19(1)(f) of the Constitution.

Conclusion:
The court dismissed the writ petitions and upheld the constitutional validity of section 271(1)(c) of the Income-tax Act, 1961, and section 18(1)(a) of the Wealth-tax Act, 1957. The court found that the provisions are not discriminatory, do not violate Article 14, and are reasonable restrictions in the interest of the general public under Article 19(1)(f) of the Constitution. The rule was discharged, and no order as to costs was made.