9911796707
TMI Blog1984 (12) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... come of Rs. 40,134. Against the said order, an appeal was filed before the Income-tax Appellate Tribunal and the Tribunal by order dated February 21, 1975, dismissed the appeal. For the assessment year 1971-72, the Income-tax Officer, Assessment-1, Circle-I, Bangalore, passed an order dated May 28, 1974, under section 271(1)(c) of the Income-tax Act, 1961, imposing a penalty of Rs. 15,000 for concealing an income of Rs. 13,213. The appeal against the said order before the Appellate Assistant Commissioner is stated to be pending. (ii) W.Ps. Nos. 13724 to 13727 of 1978 : M/s. Panduranga Coffee Works, Chickmagalur, which is a partnership firm, is the common petitioner herein. It is an assessee under the Act. For the assessment years 1968-69, 1969-70, 1970-71 and 1971-72, the Income-tax Officer levied penalties of Rs. 44,670, Rs. 17,200, Rs. 14,002 and Rs. 38,598, respectively, under section 271(1)(c) of the Income-tax Act, 1961, being 200% of what the Income-tax Officer considered to be the concealed income. The petitioner preferred appeals against the penalty orders before the Appellate Assistant Commissioner, who found that in respect of two of the four years, the actual am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return which he is required to furnish under sub-section (1) of section 14 or by notice given under sub-section (2) of section 14 or section 17, or has without reasonable cause failed to furnish within the time allowed and in the manner required by sub-section (1) of section 14 or by such notice, as the case maybe; or (b) has without reasonable cause failed to comply with a notice under sub-section (2) or sub-section (4) of section 16 ; or (c) has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts ; he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the cases referred to in clause (a), in addition to the amount of wealth-tax, if any, payable by him, a sum, for every month during which the default continued, equal to one-half per cent. of (A) the net wealth assessed under section 16 as reduced by the amount of net wealth on which, in accordance with the rates of Wealth-tax spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s admonition been more felicitously expressed than in Morey v. Doud [1957] 354 US 457, where Frankfurter J. said in his inimitable style: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The Legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events-self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability'." The learned judge went on to state (p. 255): " The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry', that exact wisdom and nice adaption of remedy are not always possible and that 'judgment is la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under the impugned sections is arbitrary and unjust and it cannot be regarded as incidental to the levy of tax. Mr. Sarangan, for the Department, urged that the imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, or under section 18(1)(a) of the Wealth-tax Act, 1957, by periodical amendments depends upon the wisdom of the Legislature to meet the growing menace to avoid payment of legitimate tax. It was intended to be an effective deterrent against tax evasion and cannot be considered as arbitrary. We do not think that there is any substance in the contentions urged for the petitioners. The legislation in question as to penalty may be prohibitive in nature, but there is no hostile discrimination against any particular taxpayer. The tax-evaders are classified into different categories. The persons grouped in each category are treated alike in the matter of imposition of penalty. History of this legislation indicates that the Legislature has been trying the trial and error method to minimise the avoidance of tax, if not altogether eliminating it. Under the Act of 1922, under section 28, no minimum penalty was laid down but the maximum penalty th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst honest taxpayers. They are directed only against deliberate tax dodgers. As Bhagwati J. observed in Special Bearer Bonds' case [1983] 133 ITR 239 (SC), economic legislation is based on experimentation or what one may call trial and error method. There may be crudities and inequities and on that ground alone the legislation cannot be struck down as invalid. Mr. Prasad rested his case in the first place on what was said by the Supreme Court in Badri Prasad v. Collector of Central Excise, AIR 1971 SC 1170. While examining the scope of sections 71 and 43 of the Gold (Control) Act, 1968, the Supreme Court observed at para. 19, page 1179: " There does not however seem any justification for an order of confiscation of gold under section 71 of the Act merely because of a failure to comply with section 16 relating to declaration. It is no doubt true that the owner is to be given a hearing in terms of section 79 and he has right of appeal under section 80 but the provision of, section 73 which allows the levy of a fine in lieu of confiscation not exceeding twice the value of the thing in respect of which confiscation is authorised appears to be unduly harsh. In this connection, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention as to discrimination contrary to article 14 of the Constitution, it was observed (p. 423): " It is also not correct to state that the burden is discriminatively cast by adopting the penalty at one-half per cent. uniformly on the net wealth assessed. Definitely, a person who is having larger net wealth pays higher penalty than the person with a smaller net wealth. The penalty also is dependent on the period of the delay as it has to be calculated at half per cent. for every month during which the default continued. It is not a uniform imposition of penalty in the sense that every defaulter, irrespective of his net wealth and the duration of the delay, is made to pay a fixed sum of money. The penalty is linked with the quantum of net wealth and the period of the delay. We do not find anything irrational in this method of levying penalty." While repelling the contention relating to article 19(1)(f) of the Constitution, this is what the Madras High Court observed (p. 426): " It should be borne in mind that any concealment of wealth and evasion of tax is a loss to the exchequer, and consequently, a loss to the public, that is, the community in general. Any provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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