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Issues involved:
Petition challenging the constitutional validity of section 140A(3) of the Income Tax Act, 1961, on the grounds of being ultra vires the Constitution of India, specifically art. 19, and beyond the legislative competence of Parliament. Details of the Judgment: The petitioner filed income tax returns for the years 1972-73 and deposited the tax within 30 days from the filing date but failed to deposit the tax within the given time, leading to a penalty imposed by the Income Tax Officer (ITO) under section 140A(3) of the Income Tax Act. The petitioner argued that section 140A(3) was confiscatory in nature and violated art. 19 of the Constitution as the power to levy penalty for non-payment of tax was not incidental to the power to tax income, thus seeking a declaration of the section as void. In response, respondent No. 1 contended that section 140A(3) was not ultra vires art. 19 of the Constitution, as the penalty was to be levied for breaching statutory obligations within the prescribed period, and was within the legislative competence of Parliament as an incidental power of the taxing authority. The petitioner's counsel cited a Madras High Court case declaring section 140A(3) as ultra vires, while respondent No. 1's counsel referred to an Andhra Pradesh High Court judgment upholding the constitutionality of the section. The court noted that section 140A(3) conferred discretion on the ITO in levying penalties, providing avenues for appeal and reference, and opined that the levy of penalty was not confiscatory, as tax arrears were a debt due to the State, not the property of the assessee. Emphasizing that the burden to prove unconstitutionality was heavy, the court upheld the constitutionality of section 140A(3), stating that non-payment of tax amounted to misappropriation of State funds and that penalties were akin to additional tax, citing a Supreme Court precedent. Concluding that Parliament had the power to levy taxes and impose penalties for non-payment to prevent tax evasion, the court dismissed the writ petition, finding no merit in the challenge to the constitutionality of section 140A(3).
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