P SUBRAHMANYAM Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) This writ petition is filed by 27 employees of Bharat Heavy Electricals Limited, Hyderabad. They have challenged in this writ petition, the validity of section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, on the ground that it is arbitrary, unjust and unconstitutional. By Act 38 of 1974, Parliament has enacted the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974. This Act, which has replaced the scheme of compulsory deposit earlier prevailing, directs the persons specified in section 3(2) of the Act to make compulsory deposits for the assessment year commencing on 1/04/1975, and every subsequent assessment year. The petitioners fall under that specification of section 3(2) of the Act and under the same, the petitioners are liable to make compulsory deposit. The compulsory deposit amount which the petitioners are liable to make is calculated on the total assessed income of the petitioners.

(2.) In this writ petition, the provisions of the above Act imposing the liability to pay the compulsory deposits are challenged. What is challenged in this writ petition is the validity of section 10 of the Act only. Section 10 of the Act is a machinery section. It imposes certain penalties on the assessees for their failure to make compulsory deposits within time. Section 10 says that if, in relation to an assessment year, any person who is liable to make a compulsory deposit has, without reasonable cause, failed to make the compulsory deposit within the time allowed or has made the compulsory deposit within such time, but the deposit so made falls short of the requisite amount and there is no reasonable cause for making such short payment, the Income-tax Officer may, by order in writing, direct that such person shall pay by way of penalty, a sum which shall be equal to twenty-five per cent. of the compulsory deposit which he is liable to make and shall be equal to twenty-five per cent. of the amount by which the compulsory deposit made by him falls short of the requisite amount. This provision imposing the penalty is under attack on the ground that it is arbitrary. No decided case has been cited in support of that contention. We also do not find it possible to hold the provision to be arbitrary. A section like section 10 of the Act which has been enacted for the enforcement of taxing provisions, can only be said to be arbitrary on the ground of procedural deposit or the imposition of excessive on the ground of procedural despotism or the imposition of excessive punishment. Section 10 cannot be faulted for those grounds. It imposes no absolute penalty. Reasonable cause for failure to make compulsory deposit in full or in time is acceptable to section 10. It also provides for deposit in full or in time is acceptable to section 10. It also provides for notice and a hearing before imposition of penalty. Therefore, it does not appear to be excessive. The decisions in Ved Vyas Chowla v. ITO [1965] 57 ITR 749 (All) and Visalakshi v. ITO [1968] 67 ITR 150 (Mys.) had upheld the then existing compulsory deposit scheme of the year 1963. So long as the validity of imposition of compulsory deposit is upheld, we cannot hold that the machinery provided by section 10 is unconstitutional. Therefore, we need make no reference to these decisions.

(3.) The writ petition fails and is accordingly dismissed, but in the circumstances, no costs.