The Tribunal and the High Court, in a reference under Section 256 of the Income-tax Act, 1961, lack the jurisdiction to declare any of the provisions of the Act to be ultra vires the Constitution.

S.S.Sodhi, J.

1. The matter here concerns the jurisdiction and competence of the authorities constituted under the Income-tax Act, 1961 (hereinafter referred to as "the Act"), namely, the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal as also the High Court, in a reference under Section 256 thereof, to declare or treat any of its provisions to be ultra vires the Constitution of India. This arises in the context of the provisions of Section 140A(3) of the Act, having been held to be ultra vires by the High Court of Madras in A.M. Sali Maricar v. ITO [1973] 90 ITR 116.

2. What had happened in the present case was that the assessee did not deposit an amount of Rs. 12,153 which was payable by him under Section 140A(1) of the Act, within a period of one month of the filing of his return. A show-cause notice was consequently issued to him calling upon him to explain why penalty be not levied upon him under Section 140A(3) of the Act. In reply, one of the points taken by the assessee was that Section 140A(3) of the Act had been declared to be ultra vires and that, therefore, no penalty could be levied under that provision. The Income-tax Officer did not accept this explanation and accordingly held the assessee liable to a penalty of Rs. 5,000. In appeal, the Appellate Assistant Commissioner reduced the penalty to Rs. 4,000. The Tribunal, however, set aside the penalty levied on the ground that the provisions of Section 140A(3) of the Act had been declared to be ultra vires by the High Court of Madras in A. M. Sali Maricars case [1973] 90 ITR 116. This is the factual background leading to the following question being referred to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provision of Section 140A(3) of the Income-tax Act, was ultra vires the Constitution and accordingly the penalty of Rs. 4,000 upheld by the Appellate Assistant Commissioner was not sustainable?"

3. The provisions of Section 140A(3) of the Act being ultra vires as per A. M. Sali Maricars case [1973] 90 ITR 116 (Mad), appears to be a lone view as several other High Courts have since upheld the constitutional validity of this provision. Amongst such High Courts are that of Calcutta in Gunny Exporters Pvt. Ltd. v. ITO [1976] Tax LR 603; that of Andhra Pradesh in Kashiram v. ITO [ 1977] 107 ITR 825 ; that of Jammu and Kashmir in Seva Ram v. ITO [1983] 141 ITR 933 ; that of Rajasthan in Mewar Textile Mills Ltd. v. ITAT [ 1985] 151 ITR 127 ; that of Karnataka in K. Sampangirama Raju v. Vth ITO [ 1988] 173 ITR 609 and that of Kerala in Mary Issac v. IAC [1987] 163 ITR 341.

4. The basic question that arises here is with regard to the jurisdiction of the Tribunal and the High Court in a reference under Section 256 of the Act to declare any of the provisions of the Income-tax Act to be ultra vires the Constitution.

5. Considering the importance and complexity of the issues raised, Mr. B.S. Gupta, Advocate, when called upon, very willingly came forth to assist us in this matter with his usual competence and clarity.

6. It will be seen that the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal as also the High Court, in a reference under Section 256 of the Act, are but functionaries created by the Act. They cannot, therefore, on principle, enquire into the constitutional validity of any of its provisions. In dealing with this matter, the Supreme Court in K. S. Venkataraman and Co. (P.) Ltd. v. State of Madras [1966] 60 ITR 112 observed (at p. 130) :

"It has been held by this court that the jurisdiction conferred upon the High Court by Section 66 of the Income-tax Act is a special advisory jurisdiction and its scope is strictly limited by the Section conferring the jurisdiction. It can only decide questions of law that arise out of the order of the Tribunal and that are referred to it. Can it be said that a question whether a pr