1968 (12) TMI 15 - HC - Income Tax

Section 297(2)(d)(i) - service of a notice - Issue of notice - it does not appear that it can be firmly stated that the provisions of the repealed Act are more onerous - provisions of s. 297(2)(d)(i) are not discriminatory or violative of the provisions of art. 14 of the Constitution, but are intra vires and valid

Summary

Issues Involved:

1. Validity of Section 297(2)(d)(i) of the Income-tax Act, 1961.
2. Classification under Article 14 of the Constitution.
3. Comparison of the provisions of the repealed Income-tax Act, 1922, and the Income-tax Act, 1961.
4. Pending proceedings and their treatment under the new Act.

Issue-wise Detailed Analysis:

1. Validity of Section 297(2)(d)(i) of the Income-tax Act, 1961:

The petitioner argued that the provisions of section 297(2)(d)(i) are ultra vires as they violate Article 14 of the Constitution. The petitioner contended that the assessees are divided into two groups: those who received notices under section 34 of the repealed Act before April 1, 1961, and those who did not. The former group is subjected to the more onerous provisions of the old Act, while the latter group benefits from the less onerous provisions of the new Act. This, according to the petitioner, constitutes discrimination. However, the court held that section 297(2)(d)(i) is valid as it adheres to the principle of pending proceedings being exempted from the operation of the new Act unless stated otherwise. The court emphasized that the provision is not discriminatory but rather a reasonable classification.

2. Classification under Article 14 of the Constitution:

The court examined whether the classification of assessees into those with pending proceedings under the old Act and those without such proceedings is reasonable. It referred to the Supreme Court decision in Budhan Choudhry v. State of Bihar, which permits reasonable classification for legislative purposes if it is based on an intelligible differentia related to the statute's objective. The court found that the classification is reasonable as it is based on the status of pending proceedings, which is a legitimate basis for differentiation. The court cited several cases, including Ramjilal v. Income-tax Officer, Mohindargarh, and Rao Shiv Bahadur Singh v. State of Vindhya Pradesh, to support the validity of treating pending proceedings as a separate class.

3. Comparison of the provisions of the repealed Income-tax Act, 1922, and the Income-tax Act, 1961:

The petitioner argued that the provisions of the 1922 Act are more onerous than those of the 1961 Act. The court analyzed various sections of both Acts, including sections 34 and 147-153. It found that while some provisions of the new Act might be more favorable to assessees, others are more stringent. For instance, section 139 of the new Act does not provide for a general notice for filing returns, which is more onerous. The court concluded that it cannot be firmly stated that the repealed Act is more onerous than the new Act as a whole.

4. Pending proceedings and their treatment under the new Act:

The court discussed the principle that pending proceedings are generally exempted from the operation of new legislation unless expressly stated otherwise. It referred to section 6 of the General Clauses Act, which supports this principle. The court noted that notices under section 34(1A) of the old Act had been issued long before the new Act came into force and that these notices are not challenged. The court held that proceedings initiated under the old Act should continue under the same Act, as there is no provision in the new Act for lapsing of old notices or issuance of fresh notices under the new Act.

Conclusion:

The court held that section 297(2)(d)(i) is not discriminatory or violative of Article 14 of the Constitution. The classification of assessees with pending proceedings under the old Act is reasonable and valid. The court dismissed the application, discharged the rule, and vacated all interim orders without any order as to costs.