LAWS(KER)-1975-7-4

RAJA RAJESWARI WEAVING MILLS Vs. UNION OF INDIA

Decided On July 16, 1975
RAJA RAJESWARI WEAVING MILLS Appellant
V/S
UNION OF INDIA Respondents

JUDGEMENT

(1.) These four Original Petitions arise from similar circumstances and raise a common question of law. In all the Original Petitions, with the exception of O. P. No. 3095 of 1973, the main prayer is for a declaration that sub-s. (3) of S.40A of the Income Tax Act, 1961 is unconstitutional and violative of Art.14 and 19(1)(g) of the Constitution. The petitioner in O. P. 3095 of 1973 has merely asked for an appropriate order restraining the respondents from collecting the balance tax for the assessment year 1970-71 till the disposal of Writ Petition No. 1197 of 1973.

(2.) We shall first deal with O. P. No. 1037 of 1973. The petitioner is a firm carrying on business in textiles and is an assessee under the Income Tax Act, 1961. The petitioner filed the return for the assessment year 1970-71 in which it showed a total income of Rs. 43,080/-. The Income Tax Officer completed the assessment on a total income of Rs. 88,980/- and disallowed a sum of Rs. 46,060/- under S 40A(3) of the Act. This amount represents various payments made by the petitioner to its customers in cash. The Income Tax Officer held that these payments were not deductible in computing the income of the petitioner under the head "profits and gains of business or profession'', as such payments were made in cash and contrary to the requirements of sub-s. (3) of S 40A. The petitioner contends that the various payments effected by it were genuine payments and the department has not doubted their genuineness. The petitioner says that its customers were not willing to accept cheques and they could not be compelled to accept them, cheques not being legal tender. It is contended that S.40A(3) imposes an unreasonable restriction and it violates Art.14 and 19(1)(g) of the Constitution. The petitioner points out that the sum of Rs. 2,500/- prescribed under the sub-section as a limit for payment in cash for the purpose of allowable deduction in computing the income of a person is an arbitrary limit and that it is discriminatory in character. The petitioner has thus prayed for the above mentioned declaration and for a writ of certiorari to quash the Ext. P1 assessment order and Ext. P3 appellate order. In a counter affidavit filed by the Commissioner of Income Tax on behalf of the 1st respondent, he points out that the petitioner and its customers could have transacted their business by cheques or drafts as banking facilities were available to them. He points out that in cases where such facilities were not available, deductions for cash payments were in fact allowed. In Para.7 of the counter affidavit it is pointed out that sub-section 3 of S.40A is a provision which was introduced in the Act by means of an amendment specifically for the purpose of preventing unaccounted money being used for clandestine transactions and that such restrictions are in the interest of revenue and national economy.

(3.) S.40A reads as follows: