Constitutional validity cannot be decided in income-tax reference jurisdiction; contrary High Court views do not enlarge territorial limits.

In reference jurisdiction under the Income-tax Act, the Tribunal and the High Court can decide only questions arising within the statutory framework and cannot pronounce on the constitutional validity of a provision; that challenge must be taken under writ jurisdiction or before the Supreme Court. A contrary view taken by another High Court does not expand this jurisdiction or permit authorities outside that court's territorial limits to treat the provision as void. The document accordingly states that section 140A(3) could not be declared ultra vires in reference proceedings, and the reference was answered in favour of the Revenue.

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Issues: Whether the Tribunal and the High Court, in a reference under section 256 of the Income-tax Act, 1961, had jurisdiction to declare section 140A(3) of the Act ultra vires the Constitution, and whether the penalty could be struck down on the basis of a contrary view taken by another High Court.

Analysis: The authorities created under the Income-tax Act, including the Tribunal and the High Court acting in reference jurisdiction, can decide only questions arising within the statutory framework of the Act. A challenge to the constitutional validity of a provision is outside that jurisdiction and must be pursued under article 226 of the Constitution of India or before the Supreme Court. A decision of one High Court is binding only within its territorial jurisdiction and does not confer jurisdiction on authorities elsewhere to treat the same statutory provision as void merely because another High Court has taken a different view.

Conclusion: The Tribunal had no jurisdiction to hold section 140A(3) ultra vires, and the reference was answered against the assessee and in favour of the Revenue.

Final Conclusion: Constitutional validity of an Income-tax Act provision cannot be pronounced upon in reference jurisdiction merely because another High Court has declared it invalid; the proper remedy lies under constitutional writ jurisdiction.

Ratio Decidendi: In a reference under section 256 of the Income-tax Act, 1961, the Tribunal and the High Court cannot adjudicate the constitutional validity of a provision of the Act, and a contrary decision of another High Court does not enlarge that jurisdiction beyond territorial limits.

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