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1956 (1) TMI 39

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..... ny stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Income Tax Officer from whom the case is transferred. (7B) The Director of Inspection, the Commissioner or the Inspecting Assistant Commissioner, as the case may be, may issue such instructions as he thinks fit for the guidance of any Income Tax Officer subordinate to him in the matter of any assessment, and for the purposes of making any inquiry under this Act (which he is hereby empowered to do), the Director of Inspection, the Commissioner and the Inspecting Assistant Com-missioner shall have all the powers that an Income Tax Officer has under this Act in relation to the making of inquiries . 2. The petitioners carry on business at Hoshiarpur. A general notice under Section 22 (1), Income Tax Act, was first issued by the Income Tax Officer, Hoshiaipur, and then another under Section 22(2), Income Tax Act, was issued calling upon the petitioners to file a return of their income for the assessment year 1950-51 and it is submitted by the Commissioner that the petitioner did not file any return upto December 1954. The assessees have submitted that they have paid all thei .....

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..... s chargeable to Income Tax of any person have escaped assessment or have been assessed at too low a rate, he can issue a notice to such person within the time specified in the Act and may proceed to assess or reassess such profits income or gains. The ordinary place of assessment of Income Tax and the officer to take assessment proceedings are mentioned in Section 64, Sub-section (1) of which provides-- 64(1) Where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the Income Tax Officer of the area in which that place is situate or, where the business profession or vocation is carried on in more places than one, by the Income Tax Officer of the area in which the principal place of his business, profession or vocation is situate . 7. In 'Dayaldas Khushi Ram v. Commissioner of Income Tax, Central' (A), it was held that this section was intended to ensure that an assessee should be assessed locally and the area to which an Income Tax Officer is appointed must as far as the exigencies of tax collection allow bear some reasonable relation to the place where the assessee carries on business or resides (per Be amount C. J. p. 23 .....

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..... was declared 'ultra vires' of the Constitution in 'Suraj Mall Mohta and Co. v. A. V. Vlsvanatha Sastri' AIR 1954 EC 545 (I), on the ground that it was a discriminatory legislation which offended against the provisions of Article 14 of the Constitution. 10. Because of this judgment of the Supreme Court the Legislature added by Section 2 of the Indian Income Tax (Amendment) Act, 1954 (Act 33 at 1954) Sub-sections (1A to ID) to Section 34(1) of the Income Tax Act. As a result of this enactment the constitutionality of Section 6 (X) of the Taxation on Income (Investigation Commission) Act (30 of 1947) was successfully challenged in Shree Meenakshi Mills Ltd. v: Sri A. V. Visvanatha Sastri AIR 1955 SO 13 (J). 11. As a consequence of the recommendation made by the Investigation Commission that the Income Tax Officer should be enabled to obtain advice in difficult cases from his superiors, Sub-s, (7B) was added to Section 5 of the Act and as a corollary superior authorities have been empowered to exercise the powers of an Income Tax Officer in making the required enquiries. 12. The petitioners relying on the rule laid down by the Supreme Court in these two and oth .....

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..... any basis for classification of the cases which may be directed to be tried by the Special Courts but left it to the uncontrolled discretion of the State Government. Mr. Justice Das in that case was of the opinion that Section 5(1) of the Act in so far as it empowered the State Government to direct offences or classes of offences or classes of cases to be tried by a Special Court did not confer an uncontrolled or unguided power on the State Government and was not void, but that part of the section which empowered the Government to direct cases as distinct from classes of cases to be tried by Special Courts was void. Patanjali Sastri C. J. held that the Act was not void or unconstitutional wholly or in part. Explaining at p. 88 the implication of Article 14 of the Constitution Mukherjea J. who gave one of the majority judgments said that the principle underlying the Article is not that the same rules of law should be applicable to all persons or some remedies available irrespective of differences of circumstances: see 'Charanjit Lal v. Union of India (L). It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilit .....

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..... evaded taxation, and (2) in the latter section arbitrary power was given to the Commission to pick and choose, and (3) because it was highly discriminatory as an evasion whether substantial or insubstantial, came within its ambit as well as within the ambit of Section 34. Income Tax Act. It was held that both Section 34, Income Tax Act and Section 5(4), Taxation on Income (Investigation Commission) Act, deal with all persons who have similar characteristics and similar properties, that is, persons who have not truly disclosed their Income and have evaded payment of taxation on Income are deprived of the substantial and valuable privileges which they would otherwise nave, and therefore, there was discrimination in procedure which was substantially different under the Taxation on Income (Investigation Commission) Act from that under 8. 34, Income Tax Act. The section was declared to be ultra vires because the findings of fact given by the Commission as to factum and extent of evasion were final and conclusive under Section 8, Taxation on Income (Investigation Commission) Act, whereas asses-sees dealt with under Section 34, Income Tax Act, were entitled to go up in appeal, seco .....

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..... inted under Section 14, Criminal P. C. to try the case of the petitioner in that case. It was held that this did not violate the guarantee under Article 14 of the Constitution as the Special Magistrate had to try the case entirely under the normal procedure and there was no kind of discrimination as was contemplated by the decision in (K) and a law vesting discretion in an authority under such circumstances cannot be discriminatory. (K), was distinguished on the ground that that decision applied to cases where on the allotment of an individual case to a special Court the procedure authorised was substantially different from the normal procedure and prejudiced the persons tried under the special procedure. 21. In 'Kedar Nath v. State of West Bengal' AIR 1963 SC 404 (Q) it was held that the equal protection clause does not prohibit special legislature. At page 406 Patanjali Sastri, O. J., said: Now, it is well settled that the equal protection of the laws guaranteed' by Article 14 of the Constitution does not mean that all laws must be general in character and universal in application and that the State is no longer to have the power of distinguishing and classifyi .....

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..... applicable to all cases can be laid down. It was also pointed out that different views have been expressed on the question of application of Article 14 of the Constitution, but there is no difference on any principle as to the construction or ,1 scope of that Article. 25. The learned Advocate-General relied on an American case 'Sunday Lake Iron Co. v. Township of Wakefield' (1918) 247 US 350 (U), where it was held that the good faith of tax officials and the validity of their actions are presumed, and when assailed, the burden of proof is upon the complaining party. At page 352 while dealing with the equal protection clause Mr. Justice Mc-Reynolds said: The purpose of the equal protection clause of the 14th Amendment is to secure every person within the State's Jurisdiction against intentional and arbitrary discrimination, whether occasioned by express terms of a statute or by its improper execution through duly constituted agents . But he was careful to point out: It is also clear that mere errors of Judgment by officials will not support a claim of discrimination. There must be something more, -- something which in effect amounts to an intentional vio .....

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