KASHIRAM Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) IN both these writ petitions, a common question is raised, namely, the constitutional validity of Sub-section (3) of Section 140A of the INcome-tax Act, 1961, and, therefore, can be disposed of by a common order. It would be sufficient to state the facts in writ petition No. 7974 of 1973.

(2.) THE petitioner is a partner in the firm of M/s. Sreeram and Company, Jambah Road, Hyderabad, and is an income-tax assessee. For the assessment year 1968-69, he filed a return on October 3, 1968, declaring an income of Rs. 25,285. Since the tax payable on the said income is more than Rs. 500, the assessee had to pay the tax due according to his return within 30 days of the filing of the return, as required by Sub-section (1) of Section 140A of the Act. THE petitioner, admittedly, did not pay the same and hence proceedings for levying penalty under Sub-section (3) were commenced by issuing a show-cause notice, to which the petitioner replied on March 22, 1971, contending that inasmuch as on the assessment being completed he has paid the entire tax due, no penalty can be levied under Section 140A(3). However, the Income-tax Officer levied a penalty of Rs. 800 against which the petitioner filed an appeal before the Appellate Assistant Commissioner which was dismissed. His appeal to the Tribunal also failed. Before the Tribunal, the petitioner appears to have raised a contention regarding the validity of the said Sub-section (3) on the basis of the decision of the Madras High Court in A. M. Sali Maricar v. Income-tax Officer . However, the Tribunal observed that they cannot go into the questions of constitutional validity of an enactment and overruled the petitioner's contention. Hence the present writ petition.

(3.) IT is thus clear that Section 140A which provides for payment of tax due in accordance with the return of income filed by an assessee, within 30 days of the filing of the return is one of the modes/stages of collection of tax devised by Parliament in exercise of its power of taxation and the petitioners in fact do not question the competency of Parliament to so provide. The Madras High Court has also upheld the legislative competence of Parliament. The principle behind the said section is that if at the end of the year the assessee is liable to pay any tax according to his own estimate of his income, he shall pay the same within 30 days of the filing of the return. If an assessee is liable to pay advance tax, he would normally pay almost the entire tax in the shape of advance tax, and if he still finds any further tax due at the end of the year, he has to pay it under Sub-section (1) of Section 140A. In the case of an assessee or in the case of income not liable for payment of advance tax, the tax due has to be paid within the said 30 days. Obviously, the finalisation of the assessment may take some time and on that occasion, the excess or deficit can be paid or refunded. IT is reasonable to presume that every person earning taxable income knows approximately the tax due from him and is expected to and has to pay the same in accordance with law. In other words, the portion of his income due towards income-tax would not be deemed by a prudent and reasonable person to be his "income", properly speaking. In the earlier days, the entire tax was payable, only after the assessment was completed. But when the theory of advance tax was introduced, he had to pay it in certain (now three) instalments as and when he is earning his income. Now, another step is introduced under Section 140A, namely, that he has to pay the admitted tax due (i.e., the tax due from him as per his own return) within 30 days of the filing of the return. All these payments towards advance tax and under section 140A(1) are liable to be adjusted at the time of the finalisation of the assessment. Now, there are provisions in the Income-tax Act providing for levy of penalties for non-compliance with the provisions relating to filing of return, non-furnishing of accounts or particulars, failure to pay advance tax, concealment or evasion of income-tax, etc. Criminal prosecution is also pro-provided for by Chapter 22 of the Act in certain cases which, inter alia, include failure to file a return of income, failure to produce accounts and documents, making of false statements and declaration, failure to deduct and pay tax when required to do so. These provisions relating to levy of penalties and criminal prosecutions are twin sanctions provided by law for ensuring compliance with law on the part of the assessees. The object of the two sets of provisions, namely, one levying penalties and the other providing for criminal prosecution, are entirely different.