1964 (9) TMI 6 - HC - Income Tax

Whether the notice issued under s. 22(2) of the old Act can be deemed to be a notice under s. 271 of the new Act - held that notice issued under the provisions of the old Act can legitimately be considered as good as a notice issued under the new Act for purposes of invoking ss. 271 and 274 of the new Act.

Issues Involved:
1. Validity of the notice issued under section 274 read with section 271 of the Income-tax Act, 1961.
2. Applicability of section 297(2)(g) of the Income-tax Act, 1961.
3. Alleged violation of Article 20(1) of the Constitution of India.
4. Alleged violation of Article 14 of the Constitution of India.
5. Whether the notice under section 22(2) of the old Act can be deemed as a notice under section 271 of the new Act.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued under Section 274 Read with Section 271 of the Income-tax Act, 1961:
The petitioners challenged the validity of the notice issued by the Income-tax Officer on April 19, 1963, under section 274 read with section 271 of the Income-tax Act, 1961. They contended that the notice should have been issued under the old Act since the default occurred before the new Act came into force. The court, however, found that the petitioners did not make a case for interference under article 226 of the Constitution. The court noted that any penalty order under the new Act would be appealable under section 246, and the petitioners could ventilate their grievances through appropriate channels, eventually bringing the case before the court under section 256 of the new Act.

2. Applicability of Section 297(2)(g) of the Income-tax Act, 1961:
The petitioners argued that section 297(2)(g) of the new Act resulted in discriminatory treatment and was violative of Article 14 of the Constitution. They claimed that the Income-tax Officer might delay assessments, subjecting some assessees to more onerous penalties under the new Act. The court, however, was not satisfied that section 297(2)(g) violated Article 14. The court observed that the legislature could make class legislation provided the classification was rational and had a reasonable nexus with the object intended to be achieved. The court found no material to show that the provision had been abused or was capable of being abused by the taxation authorities.

3. Alleged Violation of Article 20(1) of the Constitution of India:
The petitioners contended that the penalty provisions under the new Act were more onerous and infringed their fundamental right under Article 20(1) of the Constitution. The court noted that under the old Act, the maximum penalty was one and a half times the tax due, whereas under the new Act, the maximum penalty was up to 50% of the tax due. The court found that the overall burden of the penalty was not increased retrospectively, and the maximum limit of the penalty was not enhanced by the new Act. The court held that Article 20(1) hit at the infliction of a penalty greater than that which could be inflicted at the time the act was done, but the procedure prescribed under the new Act could not be held to be bad on this account. The court concluded that the provisions of section 297(2)(g) of the new Act were not invalid on the grounds urged.

4. Alleged Violation of Article 14 of the Constitution of India:
The petitioners argued that section 297(2)(g) resulted in discrimination between assessees whose assessments were completed before and after the coming into force of the new Act. The court observed that penalties under the Income-tax Act were compensatory in character and formed an integral part of the assessment proceedings. The court found that the legislature made a valid classification by distinguishing between assessments completed before and after the new Act. The court concluded that the distinction made by the legislature was valid and did not violate Article 14 of the Constitution.

5. Whether the Notice under Section 22(2) of the Old Act Can Be Deemed as a Notice under Section 271 of the New Act:
The court examined section 297(2)(k) of the new Act, which saved agreements, appointments, approvals, recognitions, directions, instructions, notifications, orders, or rules issued under the old Act. The court found that the saving provision applied to the case and that the legislature could not have intended to wipe out notices issued under the old Act with the coming into force of the new Act. The court referred to a recent Supreme Court decision in State of Orissa v. M. A. Tulloch & Co., which supported the view that rights accrued and liabilities incurred under the superseded enactment continued unless expressly obliterated by the new enactment. The court concluded that the notice issued under the old Act could be considered as valid for invoking sections 271 and 274 of the new Act.

Conclusion:
The court dismissed the writ petition, holding that the petitioners had not made out a case for interference at this stage. The court found no violation of Articles 14 or 20(1) of the Constitution and upheld the validity of the notice and the applicability of section 297(2)(g) of the new Act. The court also held that the notice under the old Act could be deemed as a notice under the new Act for the purposes of invoking the penalty provisions. No order as to costs was passed.

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