1989 Supreme(Cal) 463

High Court Of Calcutta
Susanta Chatterji
MESSRS ASIAN INDUSTRIES - Appellant
Versus
INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX - Respondent
C. R.  5424  Of  1977
Decided On : 09/18/1989

Section 144b of the Income Tax Act, 1961, is ultra vires Article 14 of the Constitution of India as it does not provide for any rational classification or proper guidelines for applying the provisions of the section to a particular assessee or class of assessees. The provisions of section 144b also violate the constitutional safeguards as they do not provide for any appeal against the directions issued by the I.A.C. under the section.

Headnote:

INCOME TAX - SECTION 144B - WRIT PETITION - ULTRA VIRES - VIOLATION OF ARTICLES 14 AND 19 (1) (F) AND (G) OF THE CONSTITUTION OF INDIA - SECTION 144B OF THE INCOME TAX ACT - DIRECTIONS BY THE INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX - BINDING ON THE INCOME TAX OFFICER - NO APPEAL AGAINST SUCH DIRECTIONS - VIOLATION OF CONSTITUTIONAL SAFEGUARDS - JURISDICTION OF THE INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX - NOTICE ISSUED WITHOUT AUTHORITY - PROVISIONS OF SECTION 144B ULTRA VIRES ARTICLE 14 OF THE CONSTITUTION OF INDIA - NO RATIONAL CLASSIFICATION - NO PROPER GUIDELINE FOR APPLYING THE PROVISIONS OF SECTION 144B - SECTION 144A AND 144B OF THE ACT ARE COMPLIMENTARY AND NOT EXCLUSIVE - I.A.C. CAN VARY THE ADDITION AS MADE BY THE I.T.O. WHILE REFERRING THE CASE UNDER SECTION 144B OF THE ACT - EXERCISE OF POWER WOULD BE REFERABLE TO THE JURISDICTION WHICH CONFERS VALIDITY UPON IT AND NOT TO JURISDICTION UNDER WHICH IT WOULD BE NUGATORY - SECTION 144B OF THE INCOME TAX ACT HAS SINCE BEEN DELETED FROM THE STATUTE - I.A.C. CANNOT ISSUE THE NOTICE AND TO INITIATE THE PROCEEDINGS IN THE MANNER AS DONE IN THE INSTANT CASE.

Fact of the Case:

The petitioner, Messrs. Asian Industries, filed a writ petition challenging the validity of section 144b of the Income Tax Act, 1961, on the grounds that it violated Articles 14 and 19 (1) (f) and (g) of the Constitution of India. The petitioner also challenged the jurisdiction of the Inspecting Assistant Commissioner of Income Tax (I.A.C.) to issue notices under section 144b and contended that the impugned notices were issued without authority.

Finding of the Court:

The court held that section 144b of the Income Tax Act was ultra vires Article 14 of the Constitution of India as it did not provide for any rational classification or proper guidelines for applying the provisions of the section to a particular assessee or class of assessees. The court also held that the provisions of section 144b violated the constitutional safeguards as they did not provide for any appeal against the directions issued by the I.A.C. under the section. The court further held that the I.A.C. had no jurisdiction to issue the impugned notices as the matter was pending before the Income Tax Officer (I.T.O.) and the I.A.C. had not taken any steps as envisaged under section 144a of the Act.

Issues: 1. Whether section 144b of the Income Tax Act, 1961, is ultra vires Articles 14 and 19 (1) (f) and (g) of the Constitution of India? 2. Whether the I.A.C. has jurisdiction to issue notices under section 144b of the Act? 3. Whether the impugned notices were issued without authority?

Ratio Decidendi: 1. The court held that section 144b of the Income Tax Act, 1961, is ultra vires Article 14 of the Constitution of India as it does not provide for any rational classification or proper guidelines for applying the provisions of the section to a particular assessee or class of assessees. The court also held that the provisions of section 144b violated the constitutional safeguards as they did not provide for any appeal against the directions issued by the I.A.C. under the section. 2. The court held that the I.A.C. has no jurisdiction to issue notices under section 144b of the Act as the matter was pending before the I.T.O. and the I.A.C. had not taken any steps as envisaged under section 144a of the Act. 3. The court held that the impugned notices were issued without authority as the I.A.C. had no jurisdiction to issue the notices.

Final Decision: The court allowed the writ petition and quashed the impugned notices. However, the court clarified that its order would not prevent the Revenue Authorities from initiating any other appropriate lawful proceedings in accordance with law by giving opportunities to the petitioner and to adjudicate the same.