SUKHDEV RATHI Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner is a businessman and also a taxpayer. In the course of assessment proceedings pertaining to asst. year 1990 91, the Assessing Officer issued a show cause notice calling upon the petitioner to explain the five deposits of Rs. 20,000 each and also to show cause why for contravention of S. 269SS of the IT Act, 1961, penalty should not be imposed upon him. The Assessing Officer held that the said deposits were genuine, but the explanation that the said deposits were accepted because cash funds were urgently required for the petitioner's business, was not accepted by him and, therefore, by an order dt. 28th Jan., 1993 he levied penalty of Rs. 1,14,113.

(2.) A contention was raised before the Assessing Officer that S. 269SS has been held as ultra vires Art. 14 of the Constitution by the Madras High Court and, therefore, no penalty could be levied under that provision. That contention was rejected on the ground that against the said judgment of the Madras High Court, an appeal is pending before the Supreme Court. The petitioner has preferred an appeal against that order to the CIT(A). Possibly, realising that the challenge to s. 269SS will not be entertained by the appellate authority, the petitioner has filed this petition challenging the validity of S. 269SS on the ground that it is violative of Arts. 14 and 19(1)(g) of the Constitution and for quashing the order of penalty dt. 28th Jan., 1993.

(3.) SEC . 269SS appears in Chapter XX B which came to be inserted by the IT (Second Amendment) Act, 1981, w.e.f. 11th July, 1981. The said chapter was inserted to counteract evasion of tax by controlling the mode of acceptance, payment or repayment of loans and deposits. The reasons why the said provision was made and what was the object which was sought to be achieved thereby are disclosed in the Departmental Circular No. 387 dt. 6th July, 1984 to which reference is made by the petitioner in paragraph 6 of the petition. The relevant part of that circular is as under :