1974 (12) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Constitutional validity of section 241 of the Income-tax Act, 1961.
2. Jurisdiction of the Income-tax Officer to withhold refunds.
3. Arbitrary exercise of power and violation of Article 14 of the Constitution.
4. Retrospective application of section 241.

Summary:

1. Constitutional Validity of Section 241 of the Income-tax Act, 1961:
The petitioner, Andhra Pradesh State Road Transport Corporation, challenged the constitutional validity of section 241 of the Income-tax Act, 1961, arguing that it is ultra vires. The court examined the scheme of section 241, which allows the Income-tax Officer to withhold refunds if an order giving rise to a refund is the subject-matter of an appeal or further proceeding, and if the grant of the refund is likely to adversely affect the revenue. The court held that section 241 is not designed to encroach upon the judicial power of the court and is subject to the final decision of the High Court or the Supreme Court.

2. Jurisdiction of the Income-tax Officer to Withhold Refunds:
The petitioner contended that the Income-tax Officer has no jurisdiction to render the judgment of the High Court ineffective on the ground that an appeal is pending before the Supreme Court. The court noted that the judgment of the High Court had not become final as an appeal was pending. Therefore, the Income-tax Officer's action of withholding the refund did not render the judgment ineffective.

3. Arbitrary Exercise of Power and Violation of Article 14 of the Constitution:
The petitioner argued that section 241 confers arbitrary power on the Income-tax Officer without providing any guidelines or classification, thus offending Article 14 of the Constitution. The court held that the power conferred on the Income-tax Officer is not absolute and is subject to the prior approval of the Commissioner of Income-tax. This check is put in place to prevent arbitrary action. Therefore, the court found no infringement of the petitioner's rights under Article 14.

4. Retrospective Application of Section 241:
The petitioner contended that section 241 has no retrospective application and can only cover the subject-matter of an appeal or further proceedings under the provisions of the new Act, not the old Act. The court referred to section 297(2)(b) and (c) of the new Act, which provides for the continuation and disposal of pending proceedings as if the new Act had not been passed. The court concluded that the right to ask for a refund accrued to the petitioner only after the High Court upheld the claim for exemption from payment of tax. Since it is a procedural matter, section 241 need not be made retrospectively applicable.

Conclusion:
The court dismissed the writ petition, upholding the validity of section 241 of the Income-tax Act, 1961, and found no merit in the contentions regarding the jurisdiction of the Income-tax Officer, arbitrary exercise of power, violation of Article 14, and retrospective application. The petition was dismissed with costs.