1959 (5) TMI 42 - HC - Income Tax

Validity of Income-tax Act Section 34(1A) upheld, ensuring procedural rights and natural justice

The court held that Section 34(1A) of the Income-tax Act is valid and does not violate Article 14 of the Constitution. The court determined that the ... - Issues Involved:1. Validity of Section 34(1A) of the Income-tax Act under Article 14 of the Constitution.2. Whether the proceedings under Section 34(1A) are judicial or quasi-judicial and if the Income-tax Officer has a bias.Issue-wise Detailed Analysis:1. Validity of Section 34(1A) of the Income-tax Act under Article 14 of the Constitution:- Petitioner's Argument: The petitioner argued that Section 34(1A) is ultra vires of Article 14 of the Constitution as it denies equality before the law. The contention was that persons who could be dealt with under Section 34(1A) could also be dealt with under Section 34(1) of the Act, leading to discriminatory treatment.- Court's Analysis:- Section 34(1) and 34(1A) Comparison: Section 34(1) allows the Income-tax Officer to issue a notice if income has escaped assessment due to the assessee's omission or failure. Section 34(1A), introduced in 1954, also allows the Income-tax Officer to issue a notice for escaped income during the period from September 1, 1939, to March 31, 1946, if the escaped income is likely to be one lakh rupees or more, without any limitation period.- Interpretation of Provisions: The court interpreted that the procedure under Section 34(1A) should be the same as under Section 34(1). The provisions of the Act, including Sections 23, 31, 33, and 66, apply to both sections, ensuring no discrimination in procedural rights.- Legislative Intent: The court noted that the legislative intent was to ensure that persons who evaded tax during the war period and whose evasion was substantial should not escape due to the limitation period. The differentiation in limitation periods was justified due to the specific historical context and the substantial amount involved.- Conclusion: The court held that Section 34(1A) does not violate Article 14 of the Constitution as the procedural rights under the Act are equally available to persons proceeded against under either Section 34(1) or 34(1A).2. Whether the proceedings under Section 34(1A) are judicial or quasi-judicial and if the Income-tax Officer has a bias:- Petitioner's Argument: The petitioner contended that the proceedings under Section 34(1A) are judicial or quasi-judicial and the Income-tax Officer, being an interested party, has a bias, making the proceedings invalid.- Court's Analysis:- Nature of Proceedings: The court acknowledged that proceedings for assessment or reassessment under Section 34 are judicial or quasi-judicial in nature, as established by the Supreme Court in Suraj Mall Mohta and Co. v. A.V. Viswanatha Sastri.- Bias of Income-tax Officer: The court considered whether the Income-tax Officer, as an employee of the Revenue Department, could be considered biased. It was noted that the Income-tax Officer is expected to act impartially and in accordance with the law.- Appeal and Review Mechanism: The court emphasized that the Income-tax Act provides for appeals to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, ensuring that any initial bias by the Income-tax Officer can be corrected through these independent appellate authorities.- Conclusion: The court concluded that even if the Income-tax Officer has a bias, the availability of an independent appellate mechanism ensures compliance with principles of natural justice. Hence, the proceedings under Section 34(1A) are valid.Separate Judgments:- Bhargava, J.: Detailed the legislative history and interpreted the provisions to conclude that Section 34(1A) is not discriminatory and does not violate Article 14.- Chaturvedi, J.: Agreed with Bhargava, J., and provided additional reasoning to support the conclusion.- Upadhya, J. (Dissenting): Argued that Section 34(1A) does violate Article 14 due to the different procedural rights and the unlimited period for issuing notices, which could lead to discrimination.Final Decision:The majority judgment held that Section 34(1A) of the Income-tax Act is valid and does not violate Article 14 of the Constitution. The writ petitions were dismissed with costs.