BALCHAND UDAIRAM Vs. STATE OF SIKKIM

JUDGEMENT

(1.) ALL these writ petitions involve, with minor differences, common questions of law and facts and concern the validity and interpretation of the law of income tax, transfer fees and recovery proceedings in the State of Sikkim.

(2.) SIKKIM became a component State of the Indian Union by and under the Constitution (36th Amendment) Act, 1975, which inserted Art. 371 F in the Constitution. Clause (k) of that article provides that all laws in force immediately before the appointed day (i.e., 26th day of April, 1975) in the territories comprised in the State of Sikkim or any part thereof shall continue to be in force therein until amended or repealed by a competent Legislature or other competent authority. Clause (n) provides that the President may, by public notification, extend with such restrictions or modifications as he thinks fit to the State of Sikkim any enactment which is in force in a State in India on the date of the notification. The IT Act, 1961, was not extended to Sikkim under the aforesaid cl. (n) of article 371 F at the relevant time, and so the law of income tax which was in force on the appointed day was applicable in the State of Sikkim during the relevant period. That law is contained in the Sikkim State Income tax Manual, 1948. The petitioners are engaged in business and, therefore, only those provisions which relate to assessment of income tax on business are relevant for the purpose of these petitions. Clause 4 of the Manual provides in sub cl. (i) that income tax shall e charged on the gross sale proceeds of the previous year of all persons engaged in business at the rate prescribed. Sub cl. (ii) provides that "every person doing business is expected to keep proper accounts and produce it on demand before the ITO who, in default or in case of unsatisfactory account, will assess tax according to his discretion". Sub cl. (iii) states that for assessment of tax, all persons doing business shall complete their accounts of the previous year before the end of June, every year. "Previous year" has been defined in cl. 2(viii) as meaning, in respect of an assessment, the financial year from April 1, to March 31, preceding the year in which tax assessed is to be collected. Clause 18 provides that "any amount specified as payable in a notice of demand, shall be paid into the State Bank within the time given thereunder, and any assessee failing so to pay shall be deemed to be in default provided that, when an assessee has presented an appeal the appellate authority may, in his discretion, pass a stay order when the assessee will not be treated as in default in respect of such tax so long as the stay order remains in force." Clause 20 states that if a person makes a statement or a verification in an income tax return which is false, and which he either knows or believes to be false or does not believe to be true, he shall be liable, on conviction, to a fine which may extend to Rs. 1,000. Clause 22 makes provision for appeal and states that "Appeal from the assessment of income tax or penalty imposed under any of the foregoing clauses will lie to His Highness the Maharaja of Sikkim through the Department concerned." Notification No. 1220 200/IT and ST dated December.20, 1973, provides for the period required to be specified in the demand notice and also for payment of interest in case the payment is not made in time by providing that any amount specified as payable in the notice of demand shall be paid within 45 days from the date of the issue of the notice. If the said amount, as specified in the notice of demand, is not paid within the aforesaid period, simple interest at twelve per cent. per annum shall be charged from the date of the notice of demand. In para 2, provision is made for payment of penal interest at the rate of 20per cent on the defaulted amount in case the payment has not been made within three months from the date of the notice of demand. Para. 3 provides as under:

(3.) UNDER S. 11, all the offences under the Act are cognizable and non bailable. Sec. 12 provides that no prosecution under the Act shall be instituted except with the previous sanction of the Government or such other officer as may be authorised by the Government in this behalf.