1983 Supreme(Raj) 402
RAJASTHAN HIGH COURT
Dwarka Prasad, J.
Mewar Textile Mills Limited - Appellant
Versus
Income - Respondent
S.B. Civil Writ Petition No. 300 of 1974.
Decided On : 19-07-1983
The provisions of section 140A(3) of the Income Tax Act, 1961, are not ultra vires article 19(1)(f) of the Constitution of India and are saved by article 19(5) thereof. The ITO has discretion to impose penalty under section 140A(3), which cannot be imposed without considering the explanation for non-payment of tax.
Headnote:
INCOME TAX - Section 140A(3) - Validity - Whether confiscatory and unreasonable restriction on right to property - Whether penalty can be imposed without considering explanation for non-payment of tax - Held, no - Provisions of section 140A(3) are not confiscatory or unreasonable - ITO has discretion to impose penalty - Penalty cannot be imposed without considering explanation for non-payment of tax.
Fact of the Case:
The petitioner company, Mewar Textile Mills Ltd., Bhilwara, filed a return of its income on June 30, 1966, and was required to make payment of tax within 30 days. However, the company deposited the tax on October 17, 1966, with a delay of 78 days. Later, the company filed a revised return on May 24, 1968, increasing its tax liability by Rs. 19,476, but failed to make payment within 30 days. The ITO imposed a penalty of Rs. 5,000, which was reduced to Rs. 4,000 by the AAC. The Tribunal upheld the imposition of penalty, rejecting the company's contention that section 140A(3) was ultra vires article 19(1)(f) of the Constitution and not saved by article 19(5) thereof.
Finding of the Court:
The court held that the provisions of section 140A(3) were not confiscatory or unreasonable restrictions on the right to property. The ITO has discretion to impose penalty, which cannot be imposed without considering the explanation for non-payment of tax. In this case, the Tribunal failed to consider the company's explanation that its management was under the control of the State Government and an IAS Officer was working as its administrator, and thus remanded the case back to the Tribunal for a fresh decision.
Issues: 1. Whether the provisions of section 140A(3) of the Income Tax Act, 1961, are ultra vires article 19(1)(f) of the Constitution of India and not saved by article 19(5) thereof? 2. Whether the Tribunal erred in upholding the imposition of penalty upon the company under section 140A(3) of the Act, without even considering the case set up by the company for non-payment of the amount of tax on self-assessment within the time limited under section 140A(1) of the Act?
Ratio Decidendi: 1. The court held that the provisions of section 140A(3) are not confiscatory or unreasonable restrictions on the right to property. The ITO has discretion to impose penalty, which cannot be imposed without considering the explanation for non-payment of tax. The court relied on the decisions of various High Courts, including Andhra Pradesh, Calcutta, Madhya Pradesh, and Jammu and Kashmir, which had upheld the validity of section 140A(3). 2. The court held that the Tribunal erred in upholding the imposition of penalty without considering the company's explanation for non-payment of tax. The court observed that the Tribunal should have considered whether, in the circumstances of the case, as explained by the assessee-company, imposition of penalty was justifiable.
Final Decision: The court partly allowed the writ petition, set aside the order of the Tribunal, and remanded the case back to the Tribunal for a fresh decision on the question of imposition of penalty, taking into consideration all the facts and circumstances of the case.
JUDGMENT
1. - The petitioner, the Mewar Textile Mills Ltd., Bhilwara (hereinafter referred to as "the company"), is a public limited company incorporated under the Companies Act, having its registered office at Bhilwara in Rajasthan. In respect Of the assessment year 1966-67, the company filed a return of its income on June 30, 1966. The company was required under section 140A(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), to make payment of such amount of tax as was payable on the basis of the aforesaid return, after taking into account the amount of tax already paid by way of advance tax, within a period of 30 days of the furnishing of the return. But the company deposited the amount of tax due to be paid on the basis of self-assessment under section 140A(1) only on October 17, 1966, and such payment was thus delayed by 78 days. Later on, on May 24, 1968, the company filed a revised return of its income, according to which the tax liability of the company was increased by a sum of Rs. 19,476, but the company also failed to make payment of the amount of enhanced tax liability within a period of 30 days from the date of filing of the return. As a matter of fact, the said amount of Rs. 19,476 was not paid by the company towards its tax liability until a provisional assessment was made by the ITO under section 141 of the Act on January 29, 1969.
2. After a notice was issued to the company under section 140A(3) of the Act, calling upon it to show cause why penalty should not be imposed on it for non-compliance with the provisions of section 140A(1), the ITO proceeded to impose a penalty of Rs. 5,000 upon the company for not depositing the amount of tax payable by it on self-assessment. The AAC, on appeal, upheld the imposition of penalty, but reduced the amount thereof from Rs. 5,000 to Rs. 4,000.
3. On further appeal to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter called "the Tribunal"), the company advanced a plea that when the revised return was filed, the company was under the control of the State Government and was managed by an administrator appointed by the State Government and as such the non-payment of the amount of tax, payable under section 140A(1) on elf-assessment was not on account of any contumacious conduct or dishonest intention on the part of the company. It was stated on behalf of the company that an I AS Officer was appointed as an administrator of the company by the State Government of Rajasthan and if he did not make payment of the amount of tax in accordance with the provisions of section 140A(1), the company should not be made liable to pay a penalty in respect thereof. The Tribunal rejected this contention. Another ground advanced before the Tribunal on behalf of the company was that the provisions of section 140A(1) of the Act were ultra vires the provisions of article 19(1)(f) of the Constitution of India and were not saved by article 19(5) thereof. A decision of the Madras High Court in Sali Maricar v. ITO, (1973) 90 ITR 116 was relied upon in support of the aforesaid contention. The Tribunal, by its order dated March 31, 1973, did not accept this contention as well and held that as there was no decision of the Rajasthan High Court or of the Supreme Court till then on the question of the alleged invalidity of the provisions of section 140A(1), the judgment of the Madras High Court was not binding upon the Tribunal and it was bound to give effect to the provisions contained in section 140A. The company filed an application before the Tribunal under section 256(1) of the Act, requesting the Tribunal to make a reference to the High Court in respect of the questions of law arising out of its order dated March 31, 1973, but the Tribunal refused to make a reference to the High Court by its order dated September 19, 1973.
4. In this writ petition, two grounds were urged by the learned counsel for the petitioner company, which were the same as were submitted on its
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