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1964 Supreme(SC) 46
SUPREME COURT OF INDIA
19th February, 1964.
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, K.C. DAS GUPTA, J.C. SHAH AND N. RAJA GOPALA AYYANGAR, JJ.
1. M/s. K. S. Rashid and Son (In C. A. No. 37 of 63). 2. Mst. Saida Begum (In C. A. No 38 of 63). 3. Said Ahmad (In C. A. No 39 of 63). 4. K. S. Rashid Ahmad (In C. A. No 40 of 63 ) and 5. Bhawani Prasad Girdhar Lal (In C. A No. 589 of 63) Appellants.
Versus
The Income tax Officer (In all the Appeals). Respondent.
Civil Appeals Nos. 37 to 40 and 589 of 1963: Petns Nos. 335 to 345 of 1960
K. S. Rashid and Son and another (In all Petitions), Petitioners v. Income-tax Officer and another (In all Petitions.) Respondents.
Civil Appeals Nos. 37 to 40 and 589 of 1963 with Petns. Nos. 335 to 345 if 1960.
Advocates appeared
Mr. G. S. Pathak, Senior Advocate, (M/s. S. N. Andley, Rameshwar Nath and P. L. Vohar, Advocates of M/s. Rajender Narain and Co., with him), for Appellants; (In C. As. Nos. 37 to 40 of 63) and the Petitioners (In all the Petitions); Mr. M. C. Setalvad, Senior Advocate, (M/s. Rameshwar Nath, S. N, Andley and P. L. Vohra, Advocates, of M/s. Rajinder Narain and Co., with him), for Appellant (In C. A. No. 589 of 63): Mr. C. K. Daphtary, Attorney General for India and Mr. K. N. Rajagopal Sastri., Senior Advocate, (Mr. R. N. Sachthey, Advocate, with them), for Respondents (In all the Appeals and Petns.).
C.K.DAFTARY, G.S.PATHAK, K.N.RAJAGOPAL SASTRI, M.C.SETALVAD, P.L.VOHRA, R.N.SACH, RAJINDAR NARAIN
Section 34(IA) of the Income-tax Act, 1922 is constitutional. The omission of specific phrasing does not deny procedural remedies, and removing limitation periods for high-value escaped income during the war period constitutes a rational classification under Article 14 of the Constitution.
Headnote:(A) Income-tax Act, 1922 - Sections 22, 34(1), 34(IA), 30, 31, 32, 33, 33A and 33B - Constitution of India - Article 14 - Validity of Section 34(IA) - Challenge on grounds of denial of remedy of appeal and revision and removal of limitation period - Omission of specific words in Section 34(IA) compared to Section 34(1) does not deprive assessees of remedies of appeal and revision - The phrase "provisions of this Act shall, so far as may be, apply accordingly" indicates that the procedure for assessment and subsequent remedies are available - It would be irrational to assume that the taxing authority could exercise only "inherent" powers without following the prescribed procedure. (Paras 9, 10 and 11)
(B) Constitution of India - Article 14 - Rational Classification - Removal of limitation period for income escaped assessment during a specific period (September 1, 1939 to March 31, 1946) where escaped income is Rs. 1 lakh or more - Period coincided with war when huge profits were made - Classification based on high magnitude of escaped income is rational and has an intelligible connection with the object of the statute to catch escaped income. (Paras 12, 13 and 14)
Facts of the case:
Assessees challenged the validity of notices served upon them under Section 34(IA) of the Income-tax Act, 1922, for income escaping assessment. They contended that the section was ultra vires Article 14 of the Constitution because it denied them the right to appeal and revision available under Section 34(1) and removed the eight-year limitation period applicable to similar cases.
Findings of Court:
The court found that the procedural remedies of appeal and revision are indeed available under Section 34(IA). Additionally, the removal of the limitation period for a specific class of assessees with high-value escaped income during the war period constitutes a valid and rational classification.
Issues: Whether Section 34(IA) of the Income-tax Act, 1922 is ultra vires Article 14 of the Constitution on the grounds that it denies the right of appeal/revision and removes the prescribed period of limitation for a specific class of assessees.
Ratio Decidendi: The court ruled that the statutory language "apply accordingly" ensures the applicability of the general assessment procedure and remedies. Furthermore, the legislature is justified in treating a smaller class of assessees differently when the escaped income is of a high magnitude and relates to a period of exceptional profits (war period), as this forms a rational classification with an intelligible connection to the object of the Act.
Result: Appeals and Petitions dismissed.
GAJENDRAGADKAR, C.J.I.: These civil appeals and writ petitions have been placed before us for hearing in a group , because all of them raise a common question of law about the validity of S. 34 (IA) of the Income-tax Act (No. XI of 1922) (hereinafter called the Act ). M/s. K. S. Rashid and Son, and its partner, Rashid Ahmad, are the appellants Civil Appeals Nos. 37 to 40/ 1963, and petitioners in W. Ps. Nos. 335-345/1960. The appeals arise out of the four writ petitions (Nos. 870-873 of 1956) filed by the firm and its partner in the High Court of Allahabad challenging the validity of the notices served upon them under S. 34(1A) of the Act in respect of their income for the years 1941-42 to 1946-47. These writ petitions have been dismissed by the said High Court and it is with the certificate issued by it that the firm and its partner have come to this Court in appeal. The writ petitions Nos. 335-345/1960 have been filed by the same parties in this Court under Art. 32 of the Constitution in respect of the notices served on them on the 19th March, 1956 and the order of excess profit tax levied on them. In those petitions, the same point is urged by the parties; and that is that the notices are invalid, because S. 34(IA) is itself ultra vires. The respondents to the appeals are: the Commissioner of Income-tax U. P., Lucknow, and the Income-tax Officer, Central Circle IV, Delhi. The respondents to the writ petitions are: the Income-tax Officer, Central Circle IV, New Delhi, the Income-tax Officer, A Ward, Meerut, the Commissioner of Income-tax, U. P., Lucknow, and the Central Board of Revenue. New Delhi.
2. Civil Appeal No. 589 of 1963 has been brought to this Court in similar circumstances by the appellant, M/s. Bhawani Prasad Girdharlal. The appellant has challenged the validity of the notices issued against it on the 16th August, 1955 under S. 34(IA) of the Act. The writ petition filed by the appellant has been dismissed by the Allahabad High Court and it is with the present appeal has been brought to this court. That is how the only question which arises for our decision in this group of matters relates to the validity of Section 34(IA) of the Act.
3. The argument urged in support of the challenge to the validity of the impugned section is that it suffers from the vice of contravening Art. 14 of the Constitution. It is urged that whereas under S. 34(1) which deals with similar cases of assessees, the remedy by way of appeals and revisions under the relevant provisions of the Act is available to the assessees, that remedy is denied to the assessees against whom proceedings are taken under the impugned section. Section 34(1) thus gives a preferential treatment to the assessees who are similarly placed with the assessees dealt with under S. 34(IA) : and that amounts to unconstitutional discrimination. It is also urged that in regard to cases falling under S. 14(1) (a) as it stood at the relevant time, a period of limitation of 8 years had been prescribed beyond which the assessing authority could not act, and this protection of the prescribed period of limitation is not available to the assessees against whom action is taken under the impugned section. It is on these two grounds that the validity of S. 34(IA) is challenged before us.
4. Section 34 deals with income, which has escaped assessment. Section 34(1) (a) deals with cases where income has, inter alia, escaped assessment, owing to the omission or failure on the part of the assessee to make a return of his income under S. 22 for any year, or to disclose fully and truly all material facts necessary for his assessment for that year, whereas S. 34(1) (b) refers to cases where income has escaped assessment notwithstanding that there has been no omission or failure as mentioned in cl. (a) on the part of the assessee. In respect of the first category of cases, S. 34(1) had provided at the relevant time that the Income-tax Officer may, in cases falling under cl. (a) at any t
