1972 (2) TMI 13 - HC - Income Tax

Petitioner an advocate on the rolls of the State Bar Council of Madhya Pradesh has instituted this writ petition to challenge a disqualification imposed on him under section 288(4) of the Income-tax Act 1961 held that disqualification in section 288(4) cannot be imposed for a default committed prior to the coming into force of 1961 Act - Petition allowed

Issues Involved:
1. Constitutionality of Section 288(4) of the Income-tax Act, 1961.
2. Applicability of Section 288(4) to acts committed before the enactment of the Income-tax Act, 1961.

Detailed Analysis:

1. Constitutionality of Section 288(4) of the Income-tax Act, 1961:
The petitioner, an advocate, challenged the disqualification imposed on him under Section 288(4) of the Income-tax Act, 1961, arguing that it was ultra vires of Article 19 and Article 14 of the Constitution of India. The petitioner contended that Section 288(4) imposed unreasonable restrictions on his right to practice as an advocate and lacked guidelines for imposing disqualification, thus infringing Article 14.

Section 288(4) specifies three classes of persons who may be disqualified:
- Those dismissed from Government service after April 1, 1938.
- Those convicted of an offense connected with any income-tax proceeding or penalized under the Act (excluding penalties under Section 271(1)(i) and (ii)).
- Insolvents.

The petitioner argued that the second class was indefinite regarding the extent of disqualification, as it allowed discretionary disqualification without clear guidelines, potentially leading to unreasonable classifications and arbitrary imposition of penalties.

2. Applicability of Section 288(4) to Acts Committed Before the Enactment of the Income-tax Act, 1961:
The petitioner argued that Section 288(4) should not apply to acts committed before the Income-tax Act, 1961, was enacted. The concealment of income occurred under the Indian Income-tax Act, 1922, and the disqualification provision in Section 288(4) did not exist at that time.

The court examined Sections 297(2)(f) and 297(2)(g) of the Income-tax Act, 1961, which deal with the imposition of penalties for assessments completed before and after April 1, 1962, respectively. The petitioner contended that applying Section 288(4) retroactively created an unreasonable classification, violating Article 14.

The leading judgment in Jain Brothers v. Union of India was referenced, which upheld the constitutionality of Section 297(2)(g) and stated that the crucial date for penalty purposes is the date of assessment completion. The Supreme Court held that the penalty provisions of the new Act apply to assessments completed after April 1, 1962, without arbitrary classification.

The court also considered whether the disqualification under Section 288(4) could be imposed retroactively. The petitioner's counsel argued that Section 297(2)(g) should not extend to disqualifications under Section 288(4) and that the legal fiction created by Section 297(2)(g) should not be amplified to include disqualifications not intended by the legislature.

The court concluded that the words "penalty imposed under this Act" in Section 288(4) refer to penalties for actual infringements of the Income-tax Act, 1961, and not to deemed infringements brought about by the fiction created in Section 297(2)(g). The court held that the disqualification under Section 288(4) could not be imposed retroactively for defaults committed under the Act of 1922.

Conclusion:
The court quashed the disqualification imposed on the petitioner, holding that Section 288(4) of the Income-tax Act, 1961, does not apply to acts committed before the enactment of the Act. The petition was allowed, and the parties were directed to bear their own costs.

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