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1964 (2) TMI 3 - SC - Income TaxWhether section 34(1A)of the Income-tax Act, 1922 is valid? Held that - No hesitation in holding that the challenge made to the validity of section 34(1A) on the ground that the remedy by way of appeals or revisions which is available to the assessees against whom proceedings are taken under section 34(1) is not available to the assessees who are covered by section 34(1A), cannot be sustained. Once the notice is served under section 34(1) or section 34(1A), the rest of the procedure is just the same and all the remedies available to the assessees are also just the same. Therefore, we see no substance in the argument that the absence of the restriction as to period of limitation under section 34(1A) introduces any infirmity in the said provision. In the result, we must hold that section 34(1A) is valid and has not contravened article 14 of the Constitution. Appeal dismissed.
Issues Involved:
1. Validity of Section 34(1A) of the Income-tax Act, 1922. 2. Alleged contravention of Article 14 of the Constitution. 3. Period of limitation for action under Section 34(1A). 4. Requirement of recording reasons and obtaining satisfaction of the Central Board of Revenue before issuing a notice under Section 34(1A). Issue-Wise Detailed Analysis: 1. Validity of Section 34(1A) of the Income-tax Act, 1922: The appellants challenged the validity of Section 34(1A) of the Income-tax Act, 1922. The primary argument was that this section contravenes Article 14 of the Constitution by denying the assessees the remedies of appeals and revisions available under Section 34(1). The court examined the legislative intent behind the enactment of Section 34(1A) and concluded that the omission of the phrase "as if the notice were a notice issued under that sub-section" in Section 34(1A) did not deprive the assessees of the procedural safeguards and remedies available under the Act. The court held that the notice issued under Section 34(1A) must be treated similarly to a notice under Section 22(2), thereby ensuring the applicability of relevant provisions, including those related to appeals and revisions. 2. Alleged Contravention of Article 14 of the Constitution: The appellants argued that Section 34(1A) resulted in unconstitutional discrimination because it treated similarly placed assessees differently. The court acknowledged the rational classification between assessees under Section 34(1) and those under Section 34(1A). The classification was based on the period during which the income had escaped assessment (September 1, 1939, to March 31, 1946) and the magnitude of the escaped income (Rs. 1 lakh or more). The court found that this classification had an intelligible connection with the legislative objective of catching significant escaped income and thus did not violate Article 14. 3. Period of Limitation for Action under Section 34(1A): The appellants contended that the absence of a period of limitation in Section 34(1A), unlike the eight-year limitation in Section 34(1)(a), constituted unconstitutional discrimination. The court rejected this argument, stating that the legislature was justified in treating assessees with significant escaped income differently, given the historical context of large profits during the war period. The absence of a limitation period for high-magnitude escaped income cases was deemed a rational classification aligned with the legislative objective. 4. Requirement of Recording Reasons and Obtaining Satisfaction of the Central Board of Revenue: In Civil Appeal No. 589 of 1963, the appellant argued that the Income-tax Officer did not comply with the proviso to Section 34(1A), which required recording reasons and obtaining the Central Board of Revenue's satisfaction before issuing a notice. The court found no merit in this argument, as the appellant had not contested the recording of reasons but only the non-receipt of a copy of those reasons. The court noted that the pleadings established that reasons were recorded, and the appellant's contention was thus unfounded. Conclusion: The Supreme Court upheld the validity of Section 34(1A) of the Income-tax Act, 1922, and dismissed all civil appeals and writ petitions. The court found no contravention of Article 14 and concluded that the legislative classification and procedural requirements under Section 34(1A) were justified and constitutionally valid. Appeals and petitions were dismissed without any order as to costs.
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