High Court decision on Section 140A(3) holding it unconstitutional - Income Tax - 608/CBDT

INSTRUCTION NO. 608/CBDT Dated : September 1, 1973 Section(s) Referred: 140A(3) Statute: Income - Tax Act, 1961 Attention is invited to theMadras High Court's decision in the above-noted case striking down section 140A(3) of the I.T.Act as un-constitutional. The decision has not been accepted and a leave petition for appeal to the Supreme Court has been authorised. A copy of the notes recorded by the Ministry of Law in this connection is printed for information and guidance. Copy of Notes Recorded in the Ministry of Law, Justice and Company Affairs (Department of Legal Affairs) on 3-8-1973 on the CBDT file No.279/299/72-ITJ. The judgement of the Madras High Court striking down section 140A(3) of the I.T.Act as un-constitutional has now been reported in 90-ITR-p.116. It is small consolation to the Department that most of the arguments put forward on behalf of the defaulting assessee were rejected since the ultimate conclusion is adverse to the revenue. 2. The judgement of the High Court in may view is open to question. The learned judges appear to have assumed that arrears of tax are only a civil liability and that the levy of a penalty as distinct from high rates of interest are confiscary and as such the section infringes the fundamental right guaranteed by Article 19(I)(f) of the Constitution. The fact that the penalty is quasi-criminal in nature and is a punishment for a wilful default and not compensation for delayed payment appears to have escaped the attention of the Court. 3. I would suggest that the appeal might be vigorously pursued. It does not appear to be necessary to amend the Act unless the Supreme Court upholds the view of the High Court. It may be desirable to take steps to expedite the grant of the certificate and the hearing of the appeal.